Summary:
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Boris Johnson delivers Tory party address
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Little further detail on Brexit proposals announced
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GBP remains mixed on the day
A keynote speech to close the Tory party conference from Boris Johnson has seen the PM double down on his prior stance and claim that the UK will be leaving the EU by October 31st “come what may”. The prime minister was typically flamboyant in his address with numerous soundbites and humorous references thrown in, but in keeping with allegations often levelled against him, also thin on the ground in terms of any real details as to how he hopes to secure a new and improved withdrawal agreement or solve the contentious backstop issue.
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The pound trades fairly mixed on the day with little reaction seen from the PM’s speech. Perhaps the EU response which is expected later this afternoon will provide some market moving news. Source: xStation
The main substance of the latest proposal has been described as “two borders for four years” whereby Northern Ireland will remain in regulatory alignment with the EU - and presumably accept the freedom of movement of people within the island of Ireland - until 2025. This is far from a perfect solution to what appears an impossible problem but could well be about as good as it gets as far as a compromise is concerned.
While there’s not expected to be an official response from Brussels until later this afternoon when a phone call between Juncker and Johnson is scheduled, the noises coming out of Europe this morning suggest that these proposals may not be enough to forge a major breakthrough. The bloc have said that they will examine these objectively before making a decision and that they want to enter a constructive discussion with the UK.
Given that much of this had been widely distributed beforehand there has been a minimal reaction in the markets with the pound little changed on the day after the GBP/USD rate fell to a 4-week low during Tuesday’s session. To summarise, despite all the headlines and bluster very little has changed and until there’s greater clarity on what actually lies ahead on the Brexit front the markets will likely remain in a wait-and-see mode and therefore be largely range bound.
GBPUSD bounced from its lowest level in 4 weeks yesterday at 1.2205 - a level that coincides with the bottom of the D1 cloud. Source: xStation
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