Brexit Latest: GBP/USD Spikes on Merkel Comments - US Market Open
GBP: Outperformance in the Pound as PM Johnson’s meetings with Merkel and Macron seem to be somewhat constructive. However, while Merkel appears to be open to a potential alternative to the highly contested Irish Border issue, Merkel noted that the onus is on the UK to provide a solution. That said, while the GBP is firmer amid the the absense of additional negative news, challenges remain ahead.
At the time of writing, GBPUSD surged to session highs following reports from The Hague, in which Merkel stated that we can work on finding a regime that keeps the Good Friday Agreement and also ensures integrity of EU single market, while also finding a backstop solution by October 31st.
That said, the question is whether it is enough to get passed through parliament. Uncertainty will continue to persist with headline risk notably elevated.
EUR: Firmer than expected Eurozone flash PMIs provided an initial lift to the Euro throughout the European morning with EURUSD briefly breaking above the 1.11 handle. However, while both France and Germany surprised to the upside, this is unlikely to change to the near term outlook for ECB policy, in which expectations are for a fresh package to be announced at the September meeting. Elsewhere, Italy is also in focus, whereby President Mattarella is looking to form a new coalition. (Full analysis)
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