British pound optimism is over. EU chief negotiator Michel Barnier’s optimistic rhetoric is now sounding more concerned. After meeting with Brexit Secretary of State Dominic Raab in a one-hour meeting on Sunday, the tone of the negotiations has drastically changed. No further talks are planned until Wednesday 17 October, thus leaving one single day for both EU and UK negotiators to reach a deal that will be voted on by all 27 EU members the day after. According to Prime Minister Theresa May, the current terms are not agreeable. There is a risk that EU leaders decide during the Thursday, 18 October meeting to reject the extension of a special Brexit summit in November, which would damage the UK economy and lead to a no-deal Brexit in March 2019.
The fate of Brexit depends more than ever on decisions of EU policymakers, thus pushing further pressure on GBP. Additionally, will PM May be able to sell the agreement (if any) to UK MPs in December? GBP/USD is struggling to maintain its gains from a 1.3230 high (11 October). The currency pair is approaching 1.31.
By Vincent Mivelaz