Possibility of Brexit deal – although markets respond badly

David Hobart

The chances of a Brexit deal taking place ahead of the impending key date of 31st October appeared to accelerate over the weekend – although there is still no guarantee of it happening.

Britain and the EU continued to hold talks over the course of the weekend, with mixed messages coming from all sides.

It is believed that there is a possibility that a deal could be reached before the deadline, and in particular before this week’s key summit which takes place on Thursday and Friday.

One British source yesterday described the talks as having made some progress, and that these talks would continue over the course of today (Monday).

It is believed that the current sticking point is whether or not both Prime Minister Boris Johnson and those in the EU will be able to make compromises on issues such as a potential trade border on the island of Ireland.

As a result of the uncertainty, the pound went down by more than half a percentage point over the course of the day in its pair with the US dollar – reaching $1.2568 at one stage.

In its pair with the nearby single European currency, the pound was down by roughly the same amount and was seen at 87.76 pence at one stage.

However, some analysts were more cautious and appeared to suggest that Britain might have to go back to the EU to ask for a further extension of the Brexit process.

Elsewhere, news that the German economy was looking less and less likely to experience a long recession struck a pleasing note.

It is expected that Europe’s second largest economy will go down a little when data for the Q2 2019 is released, meaning two problem periods one after the other.

This came partly as a result of a global move away from trading, fuelled partly by the ongoing problems between the US and China – and, indeed, between the US and the EU.

One of Germany’s main exports, cars, is vulnerable to the imposition of tariffs and other problems and could well suffer in the event of raised trading barriers.

The main victor of the day was the US dollar, which managed to cling to its best position in two and a half months.

This came after the US government, along with that of China, said that it was ready to confirm a partial trade deal which might let it get close to ending the ongoing battles between the two countries.

This particular deal will look at certain areas including currency, agriculture and more – and which could lay the groundwork for future deals on the issue.

This pushed the dollar to its best performance in a long while against the Japanese yen, reaching 108.63 at one stage.

This represented its best performance since the start of August.

However, this may have also been fuelled in part by the bank holiday taking place in Japan at the moment.

The chances of a Brexit deal taking place ahead of the impending key date of 31st October appeared to accelerate over the weekend – although there is still no guarantee of it happening.

This was likely to influence trading volumes, analysts suggested.

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David Hobart
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