The Pound Climbs Higher as Brexit Negotiations Continue

Was the Pound’s Sell-Off “Overdone”?

The pound has rallied higher over the last week with rates pushing towards 1.14 for the GBP EUR pair.

The pound has found a degree of support after the Conservative party conference ended up better for the Prime Minister than many had expected. As the Brexit negotiations intensify over these coming weeks the pound is likely to see a very volatile period ahead.

Focus now on the EU Summit

The markets now focus on the next EU summit in October where agreement must be made in areas by both sides for an emergency summit in November to be set up. Expect more twists and turns as the markets try to second guess the final destination of Brexit.

Whilst Theresa May must reach an agreement with the EU she must also find a suitable compromise that she will be able to get through in Parliament knowing there are around 40-50 MPs who have stated they will vote against the deal in its current form. The Prime Minister may need to find support from Labour MPs, which could prove difficult to pull off in practice. The latest news is that the Prime Minister will change her back stop arrangement which would now mean the whole of the United Kingdom remaining in a customs union if no agreement is reached.

Italian issues a concern for Euro exchange rates

It’s not just Britain which faces an uncertain period, the Italian budget plans for next year are generating a huge amount of concern as they seek to see Government spending increase sharply at a time when Government debt is already at record highs. There could be a period of Euro weakness if tensions rise higher between Italy and the EU and which could see some better opportunities for those looking to buy Euros.

Economic data this week

UK economic data is light today but a meeting between Brexit secretary Dominic Raab and Michel Barnier could create movement for the GBP EUR pair.

UK Gross Domestic Product numbers are released on Wednesday morning and could help direct the Bank of England with its future monetary policy. A small contraction in the numbers is expected but rates are more likely to be driven by Brexit.

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