Summary:
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EU chief negotiator delivers upbeat comments on Brexit
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Barnier “parameters of a possible agreement are very largely defined”
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GBP attempts to recover from early decline
Some positive remarks from the EU on Brexit have caused a move higher in the pound as the currency looks to recover from a soft start to the week. Michel Barnier, the EU’s chief negotiator has said that the main elements of an exit treaty text are ready to present to the UK cabinet on Tuesday, according to diplomats briefed on the discussions. Speaking after late-night talks that ran to almost 3am, Michel Barnier told ministers from the EU’s remaining 27 member states that “the parameters of a possible agreement are very largely defined” but still require political endorsement.
“Even through this weekend [the negotiators] worked tirelessly to reach an agreement,” Mr Barnier told ministers, according to a witness. “As of this moment, this agreement is still not reached. As in any negotiation, the final stretch is always the most difficult.” However he added: “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 tomorrow [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 negotiation to fail.” One national diplomat in the room said: “We all know that this is it.”
These remarks caused an almost immediate move higher in the pound with the GBPUSD rate jumping higher by around 70 pips in the minutes that followed. The market did begin the week with a gap lower from 1.2969 and this remains unfilled. Source: xStation
While these comments from Barnier are no doubt upbeat, they aren’t really anything new. UK PM May said last week that 95% of the treaty was ready and it seems that Barnier’s comments are just another way of phrasing this. Despite the bulk of the text being agreed upon the remaining 5-10% is significant and remains a potential stumbling block. For example the Irish backstop doesn’t represent a large part of the negotiation but unless an agreement can be reached on it then a deal won’t occur.
The bigger picture for GBPUSD shows that the market is still broadly in a range from 1.2660-1.3310. A possible double bottom may be forming. Source: xStation
