GBP/EUR – Sterling is suffering against the Euro at present and yesterday’s meeting between Angela Merkel and Theresa May will not help matters. Merkel rejected a plan for post-Brexit relations and she went as far as to say it was “unworkable.”
This does not bode well for today’s meeting at chequers where Theresa May will put forward her intentions for Brexit to her cabinet for approval. Chief Brexit negotiator David Davis has already expressed his lack of confidence in the proposal.
This will be the UK’s third attempt at a Brexit customs model. There has been little given away, but I did read the following yesterday:
ITV journalist Robert Peston is out with a post of Facebook where he says that ‘well-placed sources’ revealed Theresa May’s Brexit plan to him and that it’s the “softest possible Brexit”.
He goes into detail, which gives it a definite air of credibility.
“The UK would in effect remain in the EU’s customs union is that there is no other way of avoiding border checks between the Republic of Ireland and Northern Ireland. Or at least that is what the PM and her officials now believe.”
This would be positive for the pound if May’s plans were to be accepted, although that seems unlikely at present. I think Sterling has the potential to weaken further.
Germany, the engine room of the bloc displayed impressive industrial data yesterday after four months of decline, which helped bolster the Euro. There are concerns however about Trump’s trade war. The EU should be wary of escalating the situation with retaliatory tariffs.
Although this has the potential weaken the Euro, Brexit remains the key market mover. I think there is the possibility we could be witnessing new buoyancy levels below 1.14.
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