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Brexit Progress May Turbocharge Poundsterling

 

There’s no question the most important risk event and near term key driver for Poundsterling remains to be Brexit. This week may shape up to be an important week for Poundsterling as Prime Minister Theresa May’s Cabinet discusses about it today (Tuesday Nov 6th). The Sunday Times reports last weekend that Mrs. May has secured concession from the EU on the Irish border. The issue of Irish border backstop remains to be the key sticking point.
The government spokesman however has denied the report stating that it was merely speculation and that negotiations remain ongoing. Sunday Times also reported that the U.K will get an agreement on economic partnership with EU similar to the Canada’s free-trade accord. Mrs. May will need to get support from her cabinet before finalizing an agreement with the EU. So far, there has not been enough progress from the U.K. side to call for a special summit.
The parliament goes into recess this week, and the government wants progress made on the Irish border by Friday so that the EU can call a special Brexit summit on late November to seal the deal. The cabinet meeting today thus may see some progress from the UK side, paving the way for the withdrawal agreement to be finalized by December. A progress this week from the Cabinet meeting can potentially boost Poundsterling against other major currencies. On the other hand, further delay may not necessarily result in Poundsterling major sell-off, but it can cause further volatility in the currency.
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