The hopes of post-Brexit trade deal intensified yesterday as we saw the UK and EU commit to further trade negotiations – despite Prime Minister Boris Johnson’s threat to walk away from talks. As developments are set back on track, Sterling is holding firm in the 1.29’s against the Dollar, and against the EUR it is well supported in the 1.10’s.
Yesterday’s session saw cable make subtle gains throughout the day and finally finish above the open. GBPUSD started the day trading at 1.2974, and closed off Monday at 1.2996
GBPEUR, in contrast, depreciated over the course of the day. The pair opened strong at 1.1076, but closed off over 50 pips below that mark, at 1.1025
Michel Barnier said yesterday that the EU was ready to engage in the legal texts required to finalise a deal – a move warmly welcomed by the UK government. Barnier noted that “as stated by President Ursula von der Leyen on Friday, I confirmed that the EU remains available to intensify talks in London this week, on all subjects, and based on legal texts… we now wait for the UK’s reaction”. Michael Gove was in parliament when Barnier’s statement was released, and the Chancellor of the Duchy of Lancaster mentioned “while I’ve been at the despatch box, it has been reported that there has been a constructive move on the part of the EU”. Gove went on to add that “we need to make sure we work on the basis of the proposed intensification that they propose, and I prefer to look forward in optimism rather than necessarily to look back in anger”.
Despite this new lease of life for a Brexit deal, there is some confusion surrounding whether the EU has ‘changed its stance’ on negotiations, as Boris requested on Friday when he threatened to walk away from the deal. This message was reiterated when UK Chief Negotiator David Frost asserted that “the EU still needs to make a fundamental change in approach to the talks and make clear it has done so”.
As for EURUSD, after slumping at the end of last week, just managing to keep itself above the 1.17 handle, the pair has made substantial gains to come close to testing 1.18. The pair opened Monday at 1.1712 and climbed throughout the session to finally close at 1.1788.
On the data front, after a host of central bank speakers yesterday, we have more from BOE and Fed policymakers today. At 10:30 Vlieghe of the BOE will be speaking, then across the pond in the afternoon we have Fed members Quarles and Evans speaking at 15:50 and 18:00.
