Good morning,

GBP: Finally some movement

Sterling is higher for the second day in a row as markets react to Prime Minister Theresa May’s plans to work towards a deal on Brexit with Jeremy Corbyn in a bid to gain a longer extension of Article 50 from the EU and avoid no-deal.

The bare-bones means that, while Corbyn will get first dibs on a compromise, all options including her deal will be heading back to the Commons – probably this Friday or Monday – in order to have some form of agreement before the EU’s emergency summit on Wednesday.

The worst-case scenario remains a no-deal given it cannot be removed as the legal default until a deal has been agreed or Article 50 is revoked, with the best case for Remainers being a confirmatory referendum on Theresa May’s deal plus a customs union.

There is no point trying to second guess what MPs will get up to in the coming days but for once it is great to finally see some movement. On the balance of things, the chances of a no-deal have fallen slightly, the chances of both a long extension and a softer Brexit have risen and we see an election as an almost foregone conclusion.

Sterling can probably still consolidate around current levels but everything is so headline driven at the moment that any short term predictions are guesswork. Today’s services PMI at 09:30 will have an influence as well.

CNH: Trade deal 90% done

Once again the Chinese yuan and other trade focused currencies are on the front foot following reports overnight that a trade deal is “90%” done. According to the FT overnight, “although an agreement was within reach, the two sides remain apart on two issues – the fate of existing US levies on Chinese goods, which Beijing wants to see removed, and the terms of an enforcement mechanism demanded by Washington to ensure that China abides by the deal.”

While some have picked the end of this month as a possible deadline for these talks, there is no reason why the ongoing conversations cannot continue for a number of months after. It has to be perfect for Donald Trump to sign it but sign it he will; it’s just a case of when.

In the meantime, the positivity that we are close to the end stages of the negotiations is lifting equity markets globally and riskier currencies are benefiting as a result. The Chinese Vice Premier Lie He is in Washington to continue talks today.

Have a good day.