Be wary of thinking gains will continue for the Pound
We saw Sterling rally against the Euro to a monthly high of 1.1357 yesterday. I think the main catalyst for this spike is news that the Spanish and Dutch finance minsters are willing to get a trade deal in place with the UK. The spike may be short lived however, phase two of Brexit talks are set to be problematic. The UK and Brussels are at loggerheads before talks even begin. Michel Barnier, European Chief Negotiator for Brexit has insisted he wants UK financial services included in a deal. This is something Chief UK Brexit negotiator, David Davis has said will not happen.
Davis has said he will not allow Brussels to cherry pick terms of the deal. He has also accused EU services of advising UK businesses to relocate to the EU or risk losing their contracts. Trade is one of the most important aspects of the whole Brexit process and as talks progress expect high volatility on the GBP/EUR. A target to have a deal in place has been set for October, I think this target is very optimistic. Davis’ predecessor resigned stating the Brexit process could take up to a decade and a 2019 target for a full exit was very unrealistic.
I think current GBP/EUR levels may not last long. If we look at when the Irish border deal was agreed we saw a very brief window of opportunity when it hit 1.15. GBP/EUR quickly fell following news the deal was not legally binding.
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