EU Council Meeting Ahead – Brexit on the Spotlight

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Time is of the essence as this week’s EU Council Summit is the last before the October Council meeting, by which a deal must be agreed by the EU and the UK in order to give time for ratification and approval of the withdrawal agreement in the respective parliaments.

Last week, the British Pound exhibited a slight recovery after Theresa May’s Government won a crucial parliamentary vote concerning Brexit. Nonetheless, Ms. May had to reach some compromises with the opposition.

Moreover, a leaked draft on the conclusion of the EU Summit calls member states and stakeholders to “step up their work on preparedness at all levels for all outcomes”.

This level on uncertainty sent the GBPUSD to new seven month lows. The Brexit picture remains murky.

Will the EU Council send the GBP lower? Or will traders be encouraged and start buying the GBP?

Market experts are divided into 2 groups:

Bullish factors for the GBP
- The UK may head for a softer Brexit.
- Theresa May’s government won a decisive vote on Brexit.
Bearish factors for the GBP
- Brexit negotiations are way behind schedule.
- The risk of a ‘no deal’ scenario is back on the cards.

What do you think? Will the USDGBP rise or fall?

How are the Brexit Negotiation Progressing?

Since last March, talks have in part been deadlocked as the Prime Minister has limited room for manoeuvre back in London, with no majority for her party, and significant opposition to her ‘hard’ Brexit policy.

The four paragraph draft of the Council’s findings is unlikely to change significantly and may further dent the confidence of British businesses, as it calls upon member states to prepare for all possible scenarios, including that of a “hard Brexit”.

The document also indicates that “no substantial progress has yet been achieved on agreeing a backstop solution for Ireland/Northern Ireland”, and insists on the need for intensified efforts so that the Withdrawal Agreement can be concluded as soon as possible in order to come into effect on the date of withdrawal.

With only 9 months before the UK leaves the EU and a deal far from sight, the road ahead appears very bumpy.