A recent statement from EU chief negotiator Michel Barnier says an agreement could be reached by next Wednesday: this pushed the British pound higher. According to Barnier, 85% of the divorce is already agreed. Nevertheless, optimism might be short-lived as further uncertainty is coming. Prime Minister Theresa May is expected to submit the Brexit deal to Parliament in December – and the vote could go against her, as several of her own colleagues are willing to vote against the deal. The key remaining issue is that of border checks and free frontiers between the UK and Ireland, keeping EU and UK negotiators in intense day and night talks. The deadline of 18 October, when the future EU–UK trade deal must be submitted to all remaining 27 EU members, is nearing.
The cable continues to gain ground this week (+0.53% week-to-date), approaching the 1.3245 USD range. The 3-months 25 delta risk-reversal jumped by 4.40% since the beginning of the week, signalling further optimism.
By Vincent Mivelaz