Yesterday investors showed optimism as the Pound rallied across the board and against the US Dollar, when Mr Barnier stated a Brexit deal is possible within the next six to eight weeks.
UK Prime minister Theresa May has instructed her Cabinet to tour the country and to deliver the message that the Chequers plan is the only option for the UK and she wont be swayed. Furthermore, next week the PM is set to address the EUs 27 leaders at the Salzburg summit.
The plan is for the PM to drive home the chequers plan and the reaction of EU officials could influence GBPUSD exchange rates. Recent reports are suggesting many EU officials disagree with May’s customs and Irish border plan therefore this could be a Sterling negative event.
However, we have clearly had progression in recent weeks and it looks like the UK will secure some kind of deal, therefore I would think it’s a matter of time until the Pound starts to improve against the US Dollar.
For clients that are holding onto US Dollars and plan to buy Sterling at some stage, exchange rates are now 14% better compared to Pre Brexit levels and I believe your window of opportunity is running out. If a deal is secured and the UK and EU are suggesting November will be the final deadline, I expect the Pound will strengthen significantly.
In other news the Bank of England are set to release their latest interest rate decision on Thursday which is the key event to look out for this week. With the Bank of England raising interest rates recently, I don’t expect the Bank of England will plan to change monetary policy going forward. However it will be interesting to hear the Bank of England’s commentary moving forward. Will it be the case that Governor Mark Carney talks up the pound due to the improvement with the Brexit negotiations? If this is the case you would expect the Pound to perform well towards the back end of the week.
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