The latest set of Brexit talks came to an end yesterday and the UK team has come out fighting. International Trade Secretary Liam Fox suggested the UK will not be blackmailed and that trade deals need to become a main focus for the talks. The EU have been focused on reaching a payment deal for the UK to leave and have refused to discuss anything else till that is agreed.
Speaking with Sky News, Mr Fox said:
“I think there is frustration that we have not been able to get on that longer-term issue, that we’re stuck on this separation issue and we’re not able to get onto the issues that will matter in the longer term for the future prosperity of the UK and the people of Europe.”
Now that there is pressure coming from businesses on both sides, the talks could start to move quicker. This would have an immediate positive reaction on the Pound as the current uncertainty is the main driver for Sterling’s demise. There is obviously the small question that the Eurozone has been performing well of late, with optimism there could be a tapering of the current stimulus measures in the EU.
Will the ECB taper Quantitative Easing (QE)?
It will not be long before there is an answer on this question with the latest European Central Bank interest rate decision expected to come next week. It seems unlikely there will be any change to the interest rate but ECB President, Mario Draghi will speak after the announcement. Mr Draghi will answer questions and provide clarity on the position of the Central Bank.
Mario Draghi is notorious for causing the GBP/EUR rate to drop and it could be the same case next week. This may suggest that buying Euros before the decision could be sensible if past form is anything to go by. However Mr Draghi did hint in a speech last week that he thinks the current economic stimulus was working, so he may not change the plan just yet. We could therefore see a turn of events with Mr Draghi talking down the recent positive events and maybe Sterling could continue its revival, taking the GBP/EUR exchange rate back towards the 1.10 level.