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EUR/GBP Waits for Brexit Clues as Talks Continue

EUR/GBP Waits for Brexit Clues as Talks Continue

Nick Cawley, Strategist

Talking Points

- Hopes are rising that with some concessions from the UK, Brexit talks can enter the important second phase shortly.

- Both central banks are on hold for the next few months, so politics will drive the market.

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Brexit negotiator David Davis and his EU counterpart Michel Barnier will meet Wednesday and Thursday, with both sides hoping to break the current deadlock and push negotiations forward. And according to a report in The Sunday Times the UK may be preparing to offer up to EUR60 billion to cover the UK’s liabilities and to kick-start trade talks. While this sum may be enough to appease the EU, the UK Prime Minister may have a tough time signing off this sum with the various members of her parliament who have stated forcibly that the UK’s liabilities are much smaller.

And recent talk from Mr. Davis hints that concessions have already been made to push trade talks tothe top of the agenda. In a recent testimony David admitted that the withdrawal agreement on balance will probably “favor the union in terms of money” although he fully expected a future trade relationship to favor both sides.

And it is likely that Brexit will continue to hold sway over GBP in the short-term with little on the docket this week in terms of hard UK data or official releases. And with the Bank of England likely to stand pat on rates over the coming months, after last week’s 0.25% hike, and with the ECB also in no mood, or position, to hike rates, the interest rate differential between the two currencies will remain unchanged.

And Martin Essex will be discussing the Brexit today at 11:00am here.

A look at the daily chart shows the pair currently trapped in a 0.87450 – 0.90250 wide range with initial Fibonacci resistance at 0.89270 and support at 0.88100.

Chart: EURGBP Daily Timeframe (June 19 - November 6, 2017)

EUR/GBP Waits for Brexit Clues as Talks Continue

Chart by IG

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--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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