Pound gains on Brexit negotiations

30 August, 2018

The British pound has surged back through the $1.30 mark after progress made today on Brexit negotiations raised speculation that a deal between the European Union and Great Britain could be reached before the deadline next year.

Michel Barnier, the EU's chief Brexit negotiator, noted that the EU is prepared to offer a partnership to the EU like no other that has never existed with any other country.

This is a sharp turn from previously where he noted that the EU would stick to their guns on negotiations and leave little leeway for alternative options although Mr Barnier did note that the EU had some red lines that must be respected.

"While this doesn't mean the EU's red lines have changed in fact he explicitly confirmed that they must be respected, along with the UK's - it does suggest that more constructive conversations can happen to find a workable solution that suits both sides, should one exist," Craig Erlam, senior market analyst at Oanda said in an email.

With further negotiations between the EU and the UK due over the coming weeks, some say that this may be the start of an eventual deal regarding Brexit and we may see the pound rally further on such a scenario with a gain of around 10c against its US counterpart.

"Looking further ahead, our strong conviction remains that we think the UK is headed for a soft-Brexit, which will ultimately take GBP/USD above $1.40 over the medium term”. Said Kamal Sharma, director of G10 FX strategy at Bank of America Merrill Lynch

“We think the institutional and political constraints to a no-deal are sufficiently large to prevent such a scenario," he added.


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