The Pound continued to trade within the 1.15-1.16 interbank range at the end of last week as the market looks for its next move amongst some stagnant Brexit conditions. Today however, we have had further clarity on the extension being offered by the EU following the assertion on Friday that they will offer an extension but failing to confirm how long this extension would be. There has been little reaction by the Pound to this news.
EU grants UK Brexit extension
French President Emanuel Macron in particular was reported to require persuasion to fulfil the request for a three month extension as has been requested by Prime Minister Johnson, believing that just the shortest extension should be granted in order to impose the maximum pressure on the UK government to ensure that there is an end to the UK’s divorce from the EU. News this morning confirms that he has bowed to pressure and this extension will be approved – with the important amendment that the UK is able to leave before 31st January 2020 deadline. Donald Tusk has confirmed this morning that the bloc will allow for this so-called ‘flextension.’ This removes almost entirely the prospect of a no-deal Brexit on October 31st.
Pressure is now on the Prime Minister to break the current impasse in British Politics to deliver his Brexit deal and move the UK forward as it decouples from the single bloc. Boris Johnson has another battle on his hand if his calls for a general election on December 12th are to be successful. The opposition leader Jeremy Corbyn continues to voice his lack of support for an election until the prospect of a no-deal Brexit is ruled out completely and commented yesterday that to change his mind would require more than just a three-month extension by the EU. MPs prepare to vote on Johnson’s plans later today.
Sterling holds against the Euro
In parallel the pound has continued its own stalemate versus the euro as it continues trading the same broad range that we have held for the past ten days of 1.1450 – 1.1650. Once again, we begin the week with a lack of direction on Brexit and a lack of direction for the pound as the political uncertainty fails to provide any clarity on how UK plc may perform after leaving the EU. Westminster holds the key to progress and while it continues to hold the door locked the pound will is likely to struggle to break its current trading range. This commonly leads to exciting trading conditions as when the levels move outside of these levels you can see very quick movement, traders remain poised to see whether the Pound will lose or gain from here.
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