Tory infighting re Brexit returned to weigh on the pound yesterday as UK Prime Minister, Theresa May managed to put together a proposal with regards to a UK/EU customs arrangement that was enough to stop Brexit Secretary David Davis from resigning and possibly cause a leadership contest to be launched. With the Irish border/customs situation continuing to be an unsolvable problem the PM held a meeting with Davis and others and finally communicated that the UK Government “expects” the current customs arrangement to last no longer than December 2021, when the transition period comes to an end. The fudged statement was enough to keep the wolf from the PM’s door and appease Brexit hardliners, for now.
GBP/USD had been creeping towards 1.35. However, the political ructions caused the pound to falter dropping back below 1.34 before settling back above the figure, partly aided by some slightly hawkish comments from Bank of England Deputy Governor for Markets David Ramsden in a speech late in the afternoon. Cable is still above 1.34, and it should be a relatively quiet Friday ahead of a packed schedule next week which includes wage growth, inflation, and retail sales numbers from the UK.