The GBP had a bit of a wobble on Monday and ended up sharing bottom spot in our one-day performance table with the NZD, having at one point been on its own way below the rest of the pack, before a rally during the North American morning. GBP/USD stood around 1.4030 at lunchtime in Europe but then took a dive to the low 1.3960’s as the initial 100-point gain for DJIA futures turned into a near 100-point loss. As stocks recovered, so too did the ‘cable’ rate, even though it struggled to hold on to a USD 1.40 handle. Overnight and during the European morning it was lower once more, before rallying on unsubstantiated reports that the European parliament is in favour of a softer Brexit deal.
The UK Minister for Exiting the EU, David Davis, is set to deliver a speech today to Austrian business leaders in Vienna. According to reports, he will say, “We will continue our track record of meeting high standards after we leave the European Union. Now, I know that for one reason or another there are some people who have sought to question that our intentions. They fear that Brexit could lead to an Anglo-Saxon race to the bottom, with Britain plunged into a Mad Max-style world borrowed from dystopian fiction. … these fears about a race to the bottom are based on nothing – not history, not intention nor interest.” For all his soothing words, Mr Davis retains the image of someone who would cross the street to start a fight about Brexit and traders are wary that any unscripted remarks could once again raise tensions between him and negotiators in Brussels.
According to an ‘exclusive’ report in today’s Business Insider magazine, The European Parliament is putting together a 60-paragraph document outlining its desire for an "association agreement" with post-Brexit Britain, in a break from the position of the chief EU negotiator Michel Barnier. The European Parliament is pushing for a future relationship with the United Kingdom which could allow for Britain to retain "privileged" access to the single market. This marks a break from the direction previously taken by the EU's negotiating team, which has instead suggested that Theresa May's negotiating red lines mean Britain may only have access to a Canada-style free trade deal. It is claimed the EU Parliament currently plans to put the resolution to its Brexit Steering Group around March 8, before it is adopted at a meeting of all MEPs, also known as a plenary, in mid-March. This report lifted the GBP half a cent from its earlier low, though we might not have to wait long until it is completely disowned or contradicted by official EU sources. The British Pound opens in North America at USD1.3975, GBP/EUR1.1325 and GBP/CAD1.7600.