The pound this week has achieved multi-week highs against the euro and the dollar, primarily from positive news and sentiment surrounding a Brexit deal being reached, with some media outlets speculating that a deal could be reached as early as this weekend.
However, there are still hurdles that Theresa May faces that will stop investor confidence and the pound's value getting carried away. This was most noticeable during yesterday’s trading as the pound erred on caution regarding Northern Ireland’s DUP party’s reactions surrounding the hard border issue.
The DUP have threatened to vote against Theresa May’s Budget plans (due October 29th) and end its Parliamentary support if she agrees a deal at next week’s EU summit that leads to further checks between Northern Ireland and the rest of the UK. If this were to happen, and the DUP withdraw their support, then it is likely this would lead to a withdrawal of confidence in the Government, and could be catastrophic for the pound.
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With no major economic data tomorrow, investors will now be looking to next week’s EU summit where Michel Barnier has urged for a deal to be all but agreed before the UK and 27 member stations of the bloc meet in Brussels next Wednesday and Thursday.
There are rumours that Dominic Rabb could travel to Brussels on Monday to get a deal secured before the summit starts on Wednesday, which would likely result in Sterling spiking.
Whilst the optimism for a deal has been pushing Sterling’s value higher, there are still concerns that any deal put forward wouldn’t be great enough to satisfy all of the parties needs involved and furthermore, if a deal is agreed in principle it would still have to be pushed through Parliament before an official ratification.
With this in mind, clients looking at buying Euros with Sterling may want to stay up to speed with Brexit developments today and over the weekend. We have a range of tools here to protect you from market movement over the weekend, get in touch to find out how we can help you.
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