GBP/EUR – Although many factors dictate GBP/EUR value, the key driver at present is Brexit. There have been rumours circulating that Brussels may give concessions on the Irish border. This is because the Speaker of the House of Commons, John Bercow, has told May that unless changes are made to her current deal, it will not be put before Parliament for a third vote.
If this is the case, I would expect Sterling to rally on Thursday, and potentially break the 22-month high of 1.1805. However, the UK PM has asked for an extension, in a letter sent to the EU Council President, Donald Tusk. This is now the more likely topic to consume time in negotiations. May is expected to ask for an extra three months, bringing the deadline to 30th June.
Yesterday, the EU’s chief Brexit negotiator, Michel Barnier, said a delay would not be approved “without a good reason”. Barnier urged people to “finalise all preparations” for a ‘no deal’ scenario. He went on: “It is our duty to ask whether this extension would be useful, because an extension will be something which would extend uncertainty, and uncertainty costs.”
Is this just posturing? Or could we now be realistically looking at a ‘no deal’ situation?
Is the Euro going up or down against the Pound?
I still believe the chances of a ‘no deal’ are slim. I would expect Sterling to remain at its current buoyant levels if we are given an extension, while a late deal could push us over 1.20, a key resistance point in the past.
If you are sitting on Euros, waiting for a significant movement in your favour on EUR/GBP, I think you may be betting on a long shot. You are essentially banking on a ‘no deal’. Although the threat is still there, I do not believe either side will allow this to happen. I think if we are facing a ‘no deal’, an extension will be called. If you are sitting on Euros, it may be wise to take advantage of current levels.
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