This morning, following the latest update from Brexit negotiation team leaders Michel Barnier and David Davis the GBP/EUR exchage rate fell after a fairly negative report.
It would appear the Michel Barnier, who is head negotiator for the EU is not happy with progress and suggested he was “disturbed” about the UK’s position on certain factors. Mr Davis suggested that as usual progress was happening, even though it was slow. It appears that both sides, despite being at the 5th round of negotiations are still trying to play hardball.
What seemed in all to be a negative press conference, saw Sterling struggle with even more uncertainty on the horizon. This resulted in the GBP/EUR rate falling to the mid 1.10s. It’s worth nothing that this was the lowest point for a month.
Reports Michel Barnier might offer UK 2 year transition
In a dramatic turn of events around 5pm there were reports coming out of Germany that Michel Barnier could be prepared to offer the UK a 2 year transition to remain in the EU market. This would essentially remove the risk of a cliff edge for UK businesses providing more time to make decisions. This would massively reduce some of the uncertainty surrounding the UK that so many companies have been waiting to hear an answer on.
GBP/EUR outlook: Positivity for the Pound?
Tomorrow there is likely to be more clarity on whether or not the report is true but the market has received this move in an incredibly positive manner. The GBP/EUR rate closed the day nearly 1.5 cents above the low only 6 hours earlier.
Due to the positive movement it could continue into tomorrow and I wouldn’t be surprised to see the GBP/EUR rate back above 1.12. However, should the reports turn out to be completely false then we could once again find ourselves just above the 1.10 with concerns of parity just around the corner.