Theresa May Speaks in Parliament

Prime Minister Theresa May gave an update to the House of Commons today following the acceptance from the European Council that Brexit talks have progressed enough to start trade talks. The UK offered €39bn and agreed on the Irish border along with reciprocal EU citizen rights. Once the new year starts, talks between the UK and the EU will move to how the working relationship will look moving forwards. Arguably though you’d have thought this would mean that clarity for businesses would provide Sterling with a boost, however on Friday Sterling lost ground across the board.

One of the main reasons for the losses at the end of last week were the suggestions made by several EU Leaders that the hardest talks were yet to come. Considering the recent breakthrough has taken 9 months to finally agree on, the idea that in the next 15 months Brexit will be fully negotiated seems hard to believe. In turn this could mean that Sterling will come under more pressure in the next few weeks.

Data this week

In the final run-up to Christmas there isn’t too much data being released however the Governor of the Bank of England, Mark Carney will speak on Wednesday. Carney is well known for weakening Sterling when he speaks about the currency and should that be the case this time the market could fall. The GBP/EUR rate could end the year in the 1.12’s which wouldn’t be too low considering the fact that several major banks predicted there would be parity by the end of the year.

Moving into next year, Brexit talks will once again be the dominant headline, however the German government need to negotiate a coalition in the first quarter. Merkel nearly had to call a second election after this year’s vote and there could still be a risk that it might happen again. If you’re holding on to buy Euros then the first few months pf next year could provide a window of opportunity.