GBP in limbo as PM May tries to convince Cabinet of customs union membership
The Brexit saga continues and despite being in the eye of the storm, GBP continues to show an air of optimism that a deal will be cut with the EU. The latest news is that the PM is to fly to Brussels today to ask for more time to agree on a deal as she attempts to get her Cabinet onside with a deal which would keep the UK inside the customs union - pro Brexiteers are staunchly against this as they want to break free and have the freedom to negotiate trade agreements outside of the EU.
There is plenty of uncertainty ahead, and at this time, sentiment can change very quickly as the talks are now in crunch time. It is not hard to see why sellers chose to come in ahead of the 1.3200 level in Cable, though this morning, we have also seen EUR/GBP grinding out new lows just under the 0.8700 level in the face of the current impasse.
The divisions in the government are now seen as the major stumbling block as it seems the PM is open to an arrangement which keeps the UK in the customs union for now. This would not only solve the problem of the Irish border and backstop but also avoid the chaotic disruptions on everyday goods trade which is at risk should the UK crash out of the EU next march with some form of a deal in place.
EU officials - Barnier - remain committed to finding a solution by the end of the month, though they also remind the UK that the clock is ticking. Barnier also cites ongoing issues standing in the way of a full agreement, with PM May suggesting that 95% of terms have been settled. The last 5% is the tough one. Obviously!