Sterling managed to hold its ground against some stubborn resistance levels of around the 1.3000 mark on the dollar and 1.1000 against the euro, as it appears more in the market are backing the notion that the UK may finally get a deal done with the EU. Now before we all get too carried away by that as a premise, it is of course important to distinguish what kind of deal is being discussed here – the days of Mrs. May’s all encompassing trade deal dreams are seemingly long dead, barring nothing short of a political flock of pigs flying over Brussels at this point. However, it is now being more widely speculated, after last weeks article on the progress being made on fisheries, and Boris Johnson and Ursula von der Leyen’s talks this weekend, that progress towards some kind of ‘skinny’ or ‘bare bones’ deal is on the cards.
With the self-imposed proposed deadline of the 15th of October rapidly approaching, the likelihood is that GBP pairs will keep their breath held whilst awaiting confirmation of either additional rounds of talks, or perhaps even progress towards agreement on a deal in principle. To manage expectations again, the proof of the pudding for sterling will very much be in the ingredients of what make up the deal. From here, market analysts and pound buyers will want to see areas such as services, financial services and other sectors that make up sizable portions of the UK’s GDP covered to dictate how sterling fares by way of a market reaction to the upside. Conversely, if the last minute nature of the talks falter, further rounds are cancelled or headlines break bearing any negative news; the downside risk for sterling is still great indeed.
Have a great day.
Author: Joshua Haden-Jones, Senior Relationship Manager
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