Pound to euro exchange rate hits 22-week high on hopes of Brexit deal
The pound to euro exchange rate has touched 1.1585 in the last day, its highest in over 22 weeks. In part, the GBP has strengthened versus the EUR, because it looks increasingly possible that a Brexit deal may be reached as soon as today.
However, sterling’s value versus the euro could be affected, because it’s thought that Northern Ireland’s Democratic Unionist Party (DUP) may object to the draft Brexit proposals, while there are further signs that the UK economy is slowing.
Sterling strengthens versus Euro as PM Johnson makes Northern Ireland concessions
Sterling has touched this 22-week high in the last day, first because it’s reported that UK Prime Minister (PM) Boris Johnson is closer to reaching a Brexit deal, having made further concessions in the last 24 hours.
It’s thought that Mr. Johnson now concedes that Northern Ireland (NI) will effectively remain in the EU’s Customs Union, even if legally NI stays subject to UK customs rules.
This proposal was previously rejected by ex-PM Theresa May as something “no British Prime Minister could agree to”. However, with the clock ticking down to tomorrow’s EU council summit, Mr. Johnson appears to have conceded fresh ground.
Pound’s value versus Euro could be affected as DUP may object to Brexit deal
Following Mr. Johnson’s compromises, obstacles remain. In particular, the PM’s allies in Parliament, the DUP, could yet vote against the Brexit agreement, if it constitutionally separates NI from the rest of the UK. Moreover, it’s thought that, if the DUP votes against the deal, then other groups of MPs, including the pro-Brexit European Research Group (ERG), may vote down the deal too.
Mr. Johnson is due to present his Brexit progress to the House of Commons, perhaps to vote on his deal, this Saturday in an extraordinary sitting. Expect GBP/EUR volatility ahead of this key Parliamentary sitting as news breaks regarding which way the house may vote on the latest Brexit deal.
UK inflation disappoints in September following yesterday’s rise in unemployment
Elsewhere, it’s worth noting that the UK economy is showing further signs of weakness today, following yesterday’s reports that UK unemployment unexpectedly rose by +0.1% to 3.9% in the three months to August. Today, we’ve learnt that UK inflation held at 1.7% in September, below hopes for 1.8%. This points to subdued price pressures in the UK, generally considered a sign of a slower economy.
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