Pound off lows following Brexit secretary’s letter implying a deal date

The Pound has just moved off its recent lows following the publication of a letter from the UK Brexit secretary (Raab) which implies he expects a deal by 21st November.

The letter was sent to the Brexit Select Committee and Dominic Raab wrote: “I would be happy to give evidence to the Committee when a deal is finalized, and currently expect 21 November to be suitable”.

The Pound has continued to struggle over the past couple of weeks and sterling bulls are clinging onto any signs of good news. They’ve seen this letter as a signal to buy the pound but it’s likely this move could be very short-lived as he’s not explicitly saying he thinks the deal will be done by then. Also the date of the 21st was  a date given to him by the select committee to appear before them which is likely why he’s referring to it and finally the letter is dated 24th Oct.

So overall, all he’s really saying is he plans to appear before them on that date if a deal is done but will cancel if a deal isn’t made!

Regardless, following this release, the GBP/USD moved up close to 1-cent but still trades around 10-week lows. The GBP/EUR touched 1-cent higher and traded up to a 1-week high.  Brexit is likely to continue to be the dominant driver of the Pound and as the deadline approaches we expect increased volatility. November could be quite an interesting month for Sterling, so watch this space….

Pound down as political uncertainty grows

Sterling has lost ground today as fears have increased that Theresa May could face a challenge to her leadership.

May has come under further pressure over the weekend after failing to agree a deal with the EU last week and after proposing an extension to the transition period which has angered many MPs. There have also been reports today that the DUP (NI party which prop of May’s government) are also looking to support a motion to make the EU’s backstop proposal illegal. This has added even more political uncertainty which traders dislike and hence has led to a weaker Pound.

Optimism over a Brexit deal had grown into the run up the last week’s EU summit, but early last week markets were left disappointed as the prickly Irish border backstop issue became the negotiators’  undoing again. Theresa May still seems confident that a deal will be reached and she is due to address Parliament later on today and likely to state that 95% of the deal is now agreed. Clearly none of that matters, however, if they cannot find a way to overcome the Irish border issue and many feel that she is just trying to buy more time.

In other news, Italy’s proposed budget deficit increase is still creating tension between the EU and Italy. The new Italian anti-establishment government are so far sticking by their guns and planning on not complying with the EU rules on budget obligations. It will be very interesting to see how things develop on this story. The EU might have survived Grexit and Brexit, but if Italy ended up leaving then the whole project would likely tumble.

As a result, the GBP/USD has lost nearly 1% from this morning and now trades at a 2.5-week low. The GBP/EUR has lost around 0.5 cents and also trades at the lowest levels in 2.5-weeks.

Pound pushes higher as Brexit deal optimism increases

The Pound has continued to push higher overnight as optimism increases that the UK and EU can agree a Brexit deal soon.

Negotiations have progressed well over the past couple of weeks and, importantly, it now appears they are close to finding a solution for the Irish border backstop issue which has been a major hurdle in the talks.

Adding further confidence was a Times newspaper report overnight that suggested a large number of Labour MPs (30-40) would back May’s Chequers plans if it meant reaching a deal with the EU. May has faced backlash from many Tory MPs over her Chequers plans and there were fears that it would never get voted through Parliament (even if the EU agreed to it). Therefore, with the support of these Labour MPs, the pressure will certainly ease from Theresa May and a softer Brexit would be more likely.

In other news, the Euro continues to face heavy selling pressure as the new Italian Government push for a larger budget deficit to reduce austerity levels in Italy. The EU set target deficit levels for Italy to abide by (in order to reduce their debt) but the new government are pushing back on this which is creating tensions with the EU.

As a result, the GBP/EUR has surged to a 3.5-mth high, having pushed up around 2-cents in October so far.  The GBP/USD has moved up by around a cent from yesterday and now trades at a 2-week high and the EUR/USD is around a 2-mth low.

Next up we have UK GDP and manufacturing data at 9.30am this morning.