The Pound to Euro exchange rate charts have been dancing this week following the continuing three-way wrangling between the DUP, the conservatives and the European Union.
At the beginning of the week all appeared rosy, positive conversations were taking place and the PM was enjoying a convivial lunch with Jean Claude Juncker, apparently going over the final points of the first stage of Brexit agreements. However, as with this continual debacle, all wasn’t as it may have seemed.
Apparently, the first stage of UK and EU Brexit negotiations were interrupted when Arlene Foster the Democratic Unionist party leader contacted the prime minister in order to clarify certain points relating to the Irish border. It now transpires that the DUP were not aware of the context of the deal, with the Foster branding the conditions of the deal a “big shock” and stating “it was not going to be acceptable.” The lack of clarity or misleading way the PM went around the DUP will almost certainty leave Foster with a bitter taste in her mouth, especially as she is currently propping up the UK parliament majority and saving May from another general election and the Tories from leader change.
Following the abruptly concluded negotiations Theresa May and Jean-Claude Juncker emerged from their there hour lunch in Brussels with the news that markets awaited. At this point a small GBP/EUR sell off had begun although not to the extent which markets would soon witness.
Juncker addressed the press first giving a small discussion. Essentially highlighting that despite promising working lunch negotiations and agreeance on the common issues, two or three issues still remained unresolved.
May then had her chance to address the waiting press. She stated that progress had indeed been made, insinuating that the UK and the EU were finally on the same page. She then confirmed the two parties would meet before the end of the week and remained confident a positive outcome would transpire.
As markets interpreted the comments and rumour spread that the major sticking point remained the scenario with Irish borders GBP/EUR dropped from 1.1411 to 1.1359 a trend which has continued all week.
Wednesday saw David Davis the Brexit secretary standing in front of Hillary Benn who chairs the select committee. The topic of the debate was files regarding the impact assessment of Brexit on the UK. The files have been patiently waited for three weeks. Essentially highlighting key hurdles that could be thrown up by Brexit or indeed as appears more than likely a No deal scenario.
The awkward point finally being asked by Hillary Benn ‘’has the government undertaken any impact assessments on the implication of leaving the EU on different sectors?’’
With Davis clarifying that there remarkably had not been any assessments made on any the sectors highlighted by Benn. Leaving witnesses as stunned as the Chair of the select committee. Especially as Davis has appeared on numerous shows stating that 50-60 sectors had been reviewed for the impact of Brexit.
The question now being debated in the press is whether the conservatives have deliberately misled parliament or are negligently unprepared for Brexit or a no deal outcome. Or more worryingly is the truth so ugly that an already frail UK government which appears to be being ruled by a hard-line cluster of brexiteers doesn’t want the truth to be common knowledge or used against them.
Everyday that passes and deal deadline that gets missed or surpassed is currently weakening both Theresa Mays position and the UK’s negotiating stance. The UK press remains more than aware of this with EU’s crack negotiator Michel Barnier announcing that the UK has 48hrs to agree a potential deal in order for discussions to move onto the next round of discussions. Whilst it is believed a deal will be reached. As Downing street seemingly relaying to Barnier that a solution with the DUP is being worked on, many now will only believe it when they see it, especially bearing in mind the embarrassing conclusion the and outcome witnessed on Monday.
If the UK was unable to conclude an agreement with the DUP on the Irish border and another week was to pass the Pound would almost certainly be devalued, however more important as would the little credibility the UK currently possesses.
Another hurdle that would arise if an agreement wasn’t reached shortly then a regroup of concerned parties would only happen after the European Council summit, essentially delaying talks until March.
The pound has strengthened and weakened in equal measure this week with the roller-coaster of Brexit demonstrating its power over Pound valuations. Pound to Euro rocketed as news of an EU. Brexit agreement circled with pound to euros rates moving from 1.1337 to 1.1419 in just a few hours.
As May and Juncker were no doubt digesting the finest that Brussels had to offer the pound to euro rate held strong, trading comfortably over 1.1375 for a few hours. Only when news started circling about the lack of agreement between Mays Government and the DUP did the pair start slipping. The clarification that no deal had been reached and the lack of transparency provided to the DUP has continued to impact rates. Plus, the frankly dismal amount of Brexit impact assessment that have been undertaken by the Government now leaves pound to euro rates trading at 1.1327
The closer we get to this week’s deadline the weaker the pound will inevitably slip. Expect to also see knives come out and other be vying for Mays job if we don’t have a deal at the end of this week.