Brexit Headlines driving markets

Over the last couple of days Sterling has remained steady at its current levels against its majors despite the release of the Prime Minister’s letter to Donald Tusk which proposes the European Council consider looking at “alternative arrangements” for the UK-Irish border. This was quickly responded to by the EU with basically little enthusiasm to suggest they would be open to the idea. So the current rates could be set to remain as markets await fresh Brexit developments once parliament meet again in September, with the fear of future downside risk as no deal remains on the table.

The pound did experience a small spike yesterday afternoon although short-lived following comments made by German Chancellor Angela Merkel which insinuated that there could still be some wiggle room on the Irish border issue and preserving the Good Friday agreement. Quoting they would “naturally think about practical solutions… and I’ve always said that when one has the will to find these solutions, one can do so in a short period of time. The EU is ready to find a solution.”

The pound instantly rallied on the news and the market’s immediate reaction reminds us that the currency remains highly sensitive to political releases and will continue to be driven by Brexit headlines foreseeable future. With the summer parliament recess almost over we can expect more volatility over the course of the next couple of months and tensions rise the closer we approach the October deadline.

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