Brexit plans released as exit nears closer
Thursday 3 October, 2019
Daily Currency UpdateGBP - British PoundIt feels like we are getting to the business end of Brexit and yesterday was crunch time. British Prime Minister, Boris Johnson released his plans on the withdrawal agreement and this was met with some mixed messages. Essentially the plan sees Northern Ireland stay in the European single market for goods but leave the customs union - resulting in new customs checks. Northern Ireland would leave the EU's customs union alongside the rest of the UK, at the start of 2021. But Northern Ireland would, with the consent of politicians in the Northern Ireland Assembly, continue to apply EU legislation relating to agricultural and other products - what he calls an "all-island regulatory zone". This arrangement could, in theory, continue indefinitely, but the consent of Northern Ireland's politicians would have to be sought every four years. Customs checks on goods traded between the UK and EU would be "decentralised", with paperwork submitted electronically and only a "very small number" of physical checks. These checks should take place away from the border itself, at business premises or at "other points in the supply chain" effectively creating a border in the Irish Sea. So what has been the reaction? The DUP seemed to be in full support, the extra cash promised from the PM to help with the infrastructure probably helped sweeten the deal. Irish Prime Minister Leo Varadkar, whose stance is expected to guide how the EU responds, said the UK's approach "did not fully meet the agreed objectives of the backstop". The EU Chief Brexit negotiator, Michel Barnier described the Tory boss’s proposal as a trap while the European Commission refused any secret talks with the UK before a crunch summit on October 17.Up next on the Brexit flow chart, the government is expected to set out its proposals for a Brexit deal in Parliament later today, while EU leaders also consider their response. Then we head for another Parliament suspension from October 08 to 14 in order to pave way for the Queen’s speech. The short prorogation is cited necessary to enable logistical and security preparations for the State Opening of Parliament. Markets reaction was a bit of see-saw effect. Cable bounced higher on the back of the speech, touching a days high of 1.2322 but has since dropped lower moving below 1.23 this morning. Today could be another volatile one with Services PMI being released at 9.30am and any Brexit fallout from the Houses of Parliament.
Key MoversFollowing the disastrous and 'century low' manufacturing release earlier this week the greenback’s recession fears still ring loud. The Dollar was left under pressure yesterday as data revealed that private payrolls growth slowed in September. ADP showed that private employers did not hire as many people as expected, suggesting a slowdown in the labour market. This data comes ahead of Friday’s more comprehensive non-farm payrolls report which includes both public and private sector employment. It’s worth noting that the odds of the Federal Reserve cutting rates by 25 basis points in October have already risen from 40% to 64% this week.The Trump administration announced tariffs on Wednesday after it received a green light from the World Trade Organization to impose the tariffs as retaliation for subsidies that the European Union gave to Airbus in its competition with its American rival Boeing. This placed pressure on the single currency and Italian Foreign Minister did little to alleviate the concerns. He expressed the damaging impact this will have on Italian Exports. EUR/USD has been relatively unfazed at the moment, still elevated in the mid 1.09's. This partly due to the issues concerning the US at the moment and not necessarily a strong Euro.
- GBP/EUR: 1.1200 - 1.1260 ▼
- GBP/USD: 1.2230 - 1.2330 ▼
- GBP/AUD: 1.8250 - 1.8400 ▲
- GBP/NZD: 1.9510 - 1.9710 ▲