The pound to euro exchange rate saw another day of erratic trading on Friday with a distinct lack of clarity as to the real state of play for the final destination of Brexit following the EU summit last week. Rates for GBPEUR are seeing goods to start the week with levels pushing back to 1.1069 although any new political statements could see substantial market reaction.
A UK spokesman on Friday, which was reported by Reuters said that “The trade talks are over: The EU have effectively ended them by saying that they do not want to change their negotiating positions” There was a suggestion that the EU’s chief negotiator Michel Barnier should not bother coming to London next week for any further discussions unless he is prepared to discuss practical issues such as travel and haulage. UK Prime Minister Boris Johnson has told the EU there must be a “fundamental change of approach” and that the EU must make an offer that respects the UK as an independent country.
Following the EU summit which ended Friday, there were some positive signs from EU leaders suggesting there was still hope for a deal. Both German Chancellor Angela Merkel and French President Emmanuel Macron also made positive noises. Merkel said that there was need for compromise on both sides whilst Macron acknowledged that French fishermen would have to accept that access to UK water would be “less ambitions” after the transition period ends 31st December. The EU’s chief negotiator Michel Barnier also said that he hoped to hold intensified talks to secure a deal soon.
Macron was direct however when he said after the summit that “The British, no matter what was said to them during the referendum campaign, need the European single market. They are much more dependent on us than we are on them.”
Three sticking points remain and include the political sensitive issues of fisheries, the level playing field which tackles issues such as state aid as well as an arrangement for dispute settlement. Emmanuel Macron made clear that the issue of fair competition, namely state aid was the “principal problem, the number one.”
The question now is whether there is a shift in position from the EU this week which could result in both sides coming back to the table. Those with pending pound to euro requirements to either buy or sell euros would be wise to keep track of all the latest Brexit developments at this final juncture after four and half years following the in / out EU referendum.
Cabinet minister Michael Gove has now accepted the argument for a no deal Brexit and confirmed this view in a piece in the Sunday Times over the weekend. Michael Gove has previously always preferred the outcome with a deal and his shift in stance now makes a no deal Brexit more likely. Michael Gove has accused Brussels of reneging on a pledge to offer the UK a deal in line with that what was offered to Canada. He adds that “The EU want to keep us in their tractor beam. It’s independent life, Jim, but not as we know it.”
He did suggest to the BBC that the door is still ajar if the EU did wish to change their position.
UK Consumer Price Index inflation numbers are released on Wednesday which may have some influence on the Bank of England’s decision making. Any suggestion inflation is slowing could help support the argument for further stimulus from the central bank to try and keep the British economy afloat as it struggles to re-emerge from recession when large parts of the country are having lockdown restrictions imposed.
European Central bank president Christine Lagarde will be speaking today and any further offerings as to how the central bank will intervene further as COVID-19 cases rapidly rise may help direct the value for the Euro. The European Central Bank will meet on Thursday for the latest interest rate decision and any new guidance could see a significant shift in the pound to euro forecast if any major announcements are made.
US retail sales rose sharply in September with a jump higher to 1.9% growing at the fastest pace seen in 3 months. The number was much higher than forecast and considerably higher than the August numbers which arrived at 0.6%. The number indicate a growth in home improvement as Americans spend more time at home in the Coronavirus era.
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