Pound Sterling sank to session lows after the EU’s Michel Barnier and Dominic Raab briefed the press as to the progress of the latest round of Brexit negotiations.
Speaking in Brussels, Barnier told the assembled press that not enough has been achieved on the issue of the Irish border and that the UK’s latest proposals to solve the complex stalemate concerning the future customs arrangement don’t go far enough.
In particular, the EU would not delegate “excises duty collection to a non-member”. Markets and political commentators are interpeting Barnier’s comments as a rejection of UK Prime Minister Theresa May’s Chequers plan which sought to eliminate the need for UK-EU border checks by processing excises on the EU’s behalf where necessary.
“The UK wants [the customs element of the backstop] to be UK-wide. No objection in principle. But doubts/risk of integrity to our Customs Union, Common Commercial Policy, regulatory policy, fiscal revenue. UK has promised to come back with concrete proposals,” said Barnier.
The tone is a familiar one from Barnier and suggests the EU is not yet willing to compromise with the UK to try and break the impasse over the Irish border and customs union which is concerning as there is a growing sense the UK is running out of concessions to offer the EU.
Theresa May knows she can’t give much more away to the EU withouth risking a rebellion from Brexit supporting members of her party.
Indeed, this suggests to markets that the prospect of a ‘no deal’ Brexit is a real possibility that they should be wary of and justifies the rise in hedging demand we have seen in the market over recent weeks.
No surprise, but EU’s Barnier rejects UK’s trade offer and $GBP slips to session lows,” says Marc Chandler, a prominent financial markets commentator and Wall Street veteran.
The Pound-to-Euro exchange rate squandered a solid advance against the Euro on the developments, yielding from daily highs at 1.1280 to test lows at 1.1248 following the press conference.
The Pound-to-Dollar exchange rate was seen to hit a daily high at 1.3213 to trade at 1.3130 in the wake of the press conference.
”We are not at the end of the road yet. There are major issues to be discussed and questions to be answered,” says Barnier; a sentiment foreign exchange markets appear only to well aware of.
The next round of negotiations are scheduled for mid-August