GBP Surges on Brexit Headlines
Skerdian Meta • 2 min read
Brexit news has appeared again on news portals and once again the GBP is running away with it. Reuters published a report citing an EU official that the UK and EU have reached an agreement on future ties post-Brexit.
Bloomberg released some details of the agreement most of which we have heard many times before. Let’s have a quick look at them:
- EU is to recognize UK’s independent trade policy
- Foresee equivalence for UK banks
- The transition period can be extended for up to one or two years
- EU, UK to commit to deep customs cooperation
- To commit building on single customs territory
- States determination to replace the backstop in the future
A few things stand out. The “deep customs cooperation” and the single customs territory raise a big question. This has to go through the UK Parliament first, so I don’t know if they will agree on that. It doesn’t necessarily mean that the UK will remain part of the customs union with the EU, but that is one of the main things that the Brexiteers wanted.
The backstop of the Irish border will be replaced after a period of time which is a good sign for Brexiteers. But again, we have no solution for the Irish border issue, apart from the extension of the transition period. Also, there is now mention of Gibraltar.
This agreement will have to be agreed to by 27 member states, which is another hurdle. Well, there are some good things in this agreement but most of these details we have heard before and it is still not very clear. But, this takes Brexit one step further and that is what the market needs right now.
GBP/USD has jumped around 130 pips higher, but it has retraced some of the gains now as traders try to figure out what will come next for Brexit now. Theresa May will hold a cabinet meeting soon, so let’s see what the UK politicians make of this deal.