The pound has come off its recent highs after an unscheduled meeting between Brexit Secretary Dominic Raab and the EU’s chief negotiator Michel Barnier ended after just one hour of talks on Sunday without agreement. Michel Barnier has also proposed extending the transition period by another year to work on a solution for the border, although this has not been received well in the UK to the extent that a cabinet rebellion could be on the cards. Both the previous Brexit Secretary David Davis and Boris Johnson are pushing for a change of direction and there is much rumour that David Davis is being lined up as an interim pair of hands.
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Theresa may spoke yesterday and signalled that a deal was still achievable although she was pushed by all sides of the Brexit debate.
The main impasse continues to reside over the Irish border after the EU has insisted on a second backstop, which would involve Northern Ireland remaining in the customs union rather than the United Kingdom as a whole. Theresa May has made clear that this is unacceptable as it would create a new border down the Irish Sea and isolate Northern Ireland.
It has been reported that Democratic Unionist Party (DUP) leader Arlene Foster now believes that Britain is more likely to leave without a deal after tense meetings with Michel Barnier which she described as “difficult and hostile”. The DUP hold considerable leverage considering they provide 10 votes to prop up the Government in Parliament. They have indicated that they could withdraw support to the Chancellor’s budget this month when Parliament must vote on it.
When it comes to the Chequers deal which is being championed by Theresa May, the DUP are expected to vote against it along with many other Conservative politicians who prefer a Canada plus style of deal. It has been reported that Theresa May seeks support from about 15 Labour MP’s although whether they would actually vote with the opposition remains to be seen. It remains extremely difficult for the Prime Minister to push the withdrawal agreement through Parliament, and as more time passes the number of letters being sent to the backbench 1922 Committee goes up.
It is believed that there could be up to 30 letters which have already been sent with 48 being the total required to trigger a vote of no confidence in the Prime Minister. It was reported in the Sunday Times that the figure could be as many as 42 letters now highlighting how tense the atmosphere is in Government.
Events at the summit could determine whether that number is reached - such an outcome could see a sharp fall in the price of sterling.
UK unemployment data is released this morning and the headline figure is expected to remain steady at an impressive 4%. Tomorrow sees UK Consumer Price Index inflation numbers with a small pickup expected, which would normally be seen as positive for the pound. Any improvements in the numbers could lend support to the pound although the political developments in both the UK and EU ahead of tomorrow’s summit will almost certainly overshadow the economic data.
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