UK Brexit White Paper Released
The much-awaited White Paper on Brexit is out and the market seems to have taken to it relatively calmly, with some very slight GBP gains of note. Key takeaways from 'the paper' are that there will be a facilitated customs arrangement, as if Britain is in a combined customs territory applying to goods and agri-products. They will, however, seek to diverge from EU rules on services and as such, there will be more barriers to access to the EU market than at present. The UK will also end the free movement of people, yet will allow citizens to travel freely for tourism and business. ECJ jurisdiction over the UK will also end.
Once again, we expect the key driver of GBP from here will be the reaction of the EU. While we expect there are aspects of the White Paper which will be favourable, their take on services and the end of a free movement, as well as ECJ jurisdiction, is what will likely cause some objections. It is wait and see time as a result, and as noted above, the initial reaction is a tame one but tentatively positive.
Cable is sticking close to the 1.3200 mark, though coming up we have the US inflation data so this could shake things up a little. EUR/GBP is trying to move back down towards the 0.8800 level, and continues to find buyers ahead of the base seen Monday - when we hit 0.8800. A push through here sees support levels at 0.8780 and 0.8750, while in Cable we are watching the 1.3100-50 area on the downside which guards the last two weekly lows.