Pound Recovers On Positive Brexit Statement By Barnier

Pound Recovers On Positive Brexit Statement By Barnier
November 13, 2018

It was a day of high drama in the Forex market yesterday, with the Euro picking up against the Pound to trade at 0.8780 in the morning on reports that Theresa May’s endeavors to obtain a Brexit deal by the end of March have endured a grave setback. Reports indicated that the UK and European Union negotiators were battling to fill the gap over the Irish border backstop in time for a November meeting.

Furthermore, Prime Minister May was constrained to admit that “significant” issues exist regardless of talks that went on until Monday morning. However, late Monday, the British Pound started turning around losses suffered against the Euro as there were news reports that the EU’s Chief Negotiator Michel Barnier has stated a Brexit agreement is almost ready.

 

Another volatile day for the Pound

The UK’s Cabinet members, who had been anticipating completing the final Brexit negotiations on Tuesday, were informed that the matter would barely be talked about at the gathering, other than mentioning an update of the UK’s readiness for no deal. Negotiations went on until 2.45am on Monday in search of a breakthrough that did not happen as the EU came up with a series of last-minute demands by linking additional conditions to the customs backstop, which is structured to become active if no long-term free trade agreement can be signed by the end of 2020. However, Barnier’s optimistic statement on Brexit deal reversed the Pound’s downward trend.

Barnier is quoted as saying: “Even though this weekend negotiators worked tirelessly to reach an agreement, as of this moment, this agreement is still not reached. As in any negotiation, the final stretch is always the most difficult. On the basis of our common efforts, the parameters of a possible agreement are very largely defined, On the British side, the cabinet will meet on Tuesday to examine these parameters. We are at an extremely sensitive moment. The smallest public comment from my side could be exploited by those who want the negotiations to fail.”

Following Barnier’s statement, traders were seen shielding Sterling against the greenback at the emotionally critical 1.14 level. Major news publications also reported that the UK Prime Minister Theresa May is still planning for a November Brexit deal. Across the Channel, the euro plunged to its lowest level in over 16 months as the European Commission prepared itself to raise its budget clash with Italy.

Traders are also concerned that the sequence of soft economic data may corner the Governing Council to downwardly revise its economic growth forecasts at its December meeting, with Goldman Sachs opining that legislators could be forced to postpone the beginning of rate increases if the deceleration is worse than expected.

In Italy, Deputy Prime Minister Matteo Salvini stated on Sunday that his government could block the EU’s budgetary decisions and other policies if the members of the bloc continue to exhibit disrespect for their countrymen. France has meanwhile started an intense campaign to strengthen the euro prior to the next worldwide meltdown, warning that the EU is not adequately robust to survive another catastrophe and faces deterioration without fiscal union.

Bruno Le Maire, the French finance minister, cautioned there are only weeks left for Germany and Dutch-led “Hanseatic League” to complete the long-delayed reforms.

Bruno Le Maire said: “Either we get a eurozone budget or there will eventually be no euro at all. If there was a new financial and economic crisis tomorrow, the eurozone could not respond. It is really urgent that we build-up the Eurozone’s defenses. We have been talking for too long.”

Therefore, the developments in the past two days are expected to keep the euro weak against the Pound.

Technically, the EURGBP pair is moving along a descending channel as shown in the image below. Furthermore, the stochastic indicator has started declining after reaching the bullish zone. As a result, we can expect the EURGBP pair to move downwards.

eurgbp - technical analysis - 13th November 2018

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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