Brexit Briefing: GBP/USD Rallies as Talks Make ’Considerable Progress’

2017-09-28 13:27:00

Talking Points

- Latest round of Brexit talks concludes in Brussels, with the UK’s Davis saying considerable progress has been made on issues that matter.

- However, EU’s Barnier says ‘we are not yet there’.

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The latest round of Brexit talks has made considerable progress on issues that matter, according to the UK Brexit Secretary David Davis, but his EU counterpart Michel Barnier was more nuanced in his comments.

According to Davis, the two sides are making decisive steps forward, with progress made on citizens’ rights, finance and the question of Northern Ireland’s border with the Irish Republic. Most aspects of social security coordination have been agreed, he said, adding that the talks had made important progress and capitalized on the momentum from UK Prime Minister Theresa May’s speech last week in Florence. I leave Brussels optimistic about a shared UK-EU future, Davis said.

That optimism helped lift GBP/USD to its highs of the day after it had fallen earlier on comments by Bank of England Governor Mark Carney that largely steered clear of any suggestion that an increase in UK interest rates is imminent.

Chart: GBP/USD Five-Minute Timeframe (September 28, 2017)

Chart by IG

However, Michel Barnier, the EU’s chief negotiator, sounded less confident. While May’s speech had created a new dynamic which he had felt during this week’s talks, and he had received clarity on some points, we are not there yet, he said.

On the so-called divorce bill the EU wants the UK to pay, Barnier said useful talks had been held on technical aspects but the UK had made clear it would only meet its 2019-20 budget commitments and could not say what other commitments it would honor.

We are not there yet in achieving sufficient progress but the sooner I see real progress the sooner we can move on to the second phase of the talks, Barnier said. It is far from enough for the UK just to pay its budget commitments in 2019-20 and no link is possible between the financial settlement and a future partnership, he added.

Earlier, May said the UK needs to form a close economic partnership with the EU after Brexit and confirmed the so-called implementation period could be around two years, with some elements brought forward.

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