The Pound has seen an excellent boost higher against the Euro with gains of around 1% after the EU’s chief Brexit negotiator Michel Barnier stated that the EU is prepared to offer Britain a partnership such as there has never been with a third country. His comments on the face of it suggest a softening in stance and were seized upon in the markets with the Pound rocketing against all of the major currencies including the Euro.
It was a refreshing change of stance but without detail on what can be agreed in the withdrawal agreement these kind of gains are likely to prove very limited. Michel Barnier has also reiterated that the EU must still prepare for a no deal scenario and so this outcome certainly cannot be ruled out. It is also interesting to hear that the Cabinet ministers in the British Government have been told to keep 13th September free to have a meeting to plan for a no deal Brexit.
Until the risk of a no deal Brexit has been removed completely, the Pound faces an uphill battle. With Brexit negotiations now expected to pass the initial October deadline into November and possibly beyond, there is likely to be a volatile and uncertain period ahead before the end of the year. In my opinion any deal will go right to the wire but such an agreement could prove very positive for the Pound.
UK data is light today although EU Gross Domestic Product numbers for August are released tomorrow and could create some volatility for Euro exchange rates. After a long period of weak growth and low inflation any signs of a pick up here will be seen as positive for Euro exchange rates
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