Pound rally continues on deal hopes but DUP could be a sticking point

Oct 16, 2019

Sterling has continued to gain ground as hopes of a Brexit deal continue give buyers a reason to maintain the rally. 

Brexit negotiations for a draft deal went on late last night and are continuing this morning. Michel Barnier is expected to then brief EU States this afternoon and we’ll get an idea of how the negotiations went. If they go well, we might expect EU leaders to ratify the deal at the imminent EU summit (starts tomorrow). This would likely create some further gains for the Pound. If a draft deal fails to be agreed this morning, however, then we would expect sterling to quickly give back its gains as no-deal comes back into play. 

If the draft Brexit deal is given the green light from the EU, then there will be an emergency sitting in UK Parliament this Saturday. The big question will be whether Boris can get enough support for his deal in Parliament. Reports say that the DUP won’t be able to support what is on offer at the moment. So, unless today’s negotiations can provide enough to sway the DUP, then he might struggle and may be forced to ask for a 3-month extension (or find a way for no-deal).

As you can imagine, the Sterling volatility index is extremely high at the moment, so the market are expecting these big swings to continue. Today could be a big day. 

As a result, the GBP/USD and GBP/EUR have broken some big levels and trade around 5-month highs.