The European Council Meeting in Brussels starts today and Brexit negotiations will resume at night. Now the arrangement lies in the hands of all 27 EU members that will vote tomorrow. Further progress today is not expected. However, the likelihood is of an extension to a special Brexit summit by November. US officials have also affirmed their interest to make a trade deal with the UK once the Brexit case is solved.
Accordingly, EU chief negotiator Barnier offered an extension of the transition period by 21 months, along with a two-tier backstop, which would allow both the UK and Northern Ireland to remain in the Customs Union in the case of a no-deal. This would allow more time for an EU–UK trade relationship to be built while avoiding a particular arrangement for Northern Ireland.
For now, the USD/GBP is expected to trade lower, as uncertainties continue to spread across the marketplace. A bounce could be practicable in the announcement of an extension. Today’s September data are expected to show a slowdown in inflation, which is expected to be published at 2.60% (prior: 2.70%). GBP/USD is currently trading at 1.3150, approaching the 1.3140 range.
By Vincent Mivelaz
