Good morning,
Yesterday saw the presentation of Boris Johnson’s long-concealed Brexit plan to the Conservative party conference and press; the backstop agreement, a long-held point of contention on both sides of the Brexit debate, was altered and offered to Brussels for consideration. Its reaction was, luckily for sterling, rather muted.
As I have mentioned countless times before: when politicians on either side of the Channel keep Brexit-related comments to themselves, the pound remains largely untouched. The issue that will arise now is not if politicians speak on the proposals, but when, who and what they say.
As is stands, the pound is still holding above 1.1220 on the euro and 1.2290 on the dollar, which without being slapped down by the EU, could continue to consolidate its hold. The key reason why is twofold: the EU essentially wants to be seen as at least willing to consider the UK’s proposals, and more importantly, because the EU needs a deal just as much as the UK does.
Be in no doubt, the levels of political brinkmanship will reach excruciating levels over the next couple of weeks until the EU Council summit on the 17th of this month, where plans will realistically have to be agreed upon for the UK to leave in an organised manner with a deal. If the pound wasn’t volatile enough over the last three and a half years with regards to Brexit, it’s about to get considerably worse as we approach the finish line.
Over the Atlantic, the impeachment proceedings are seemingly taking their toll on President Trump, as he lashed out at a reporter during a press conference with the Finnish Premier, chastising the “corrupt and fake news media”. Unlike the UK, this kind of outburst doesn’t have much of an effect on the dollar.
Between 13.30 and 15.00 today, jobs, inflation and factory output data will draw focus back onto the dollar, a firm reading could push EURUSD to close below 1.0900 – much to Trump’s disgust.
Have a great day,