11th Hour Talks
Ahead of the EU summit deadline this week the UK’s Brexit secretary Dominic Raab headed to Brussels for important talks aimed at resolving the issue of the Irish border. However, talks reportedly failed to deliver a solution and the market is now fearful that the two sides will be unable to agree on a solution, which will lead to a no deal Brexit.
The UK PM continues to insist that any solution needs to avoid the creation of a new border in the Irish sea which would require customs checks on goods entering Northern Ireland from the UK. The DUP, which is the conservative party’s partner in government, has been ferocious in its declaring its opposition to such a move and has vowed to cause significant disruption if May were to back such a move.
May is instead looking for a temporary situation where the whole of the UK stays in the single customs union over the Brexit transition period. However, the EU has so far said that it will only allow Northern Ireland to remain in the union as May’s proposal would give UK firms an unfair competitive advantage over EU trading rivals.
Peace Process In Focus
While the EU has said that it will compromise to an extent, clarifying that it will make an effort to de-dramatize the situation and make goods checks as un-intrusive as possible, May is aware of the damage that such as move could have to the peace process in Northern Ireland which is still fragile.
Cabinet Members Threaten To Resign
May is coming under increasing political pressure at home to secure a deal, though there is still great division over what this deal should include and several cabinet members have now threatened to resign if the PM allows for the creation of a border in the Irish sea.
For now, the market waits to hear the details of the plan that May will submit to the EU to be discussed at the upcoming summit this week, but with time running out and no sides looking willing to compromise, the threat of a no deal Brexit has grown once again.
GBP gapped lower at the open this week but has since recovered to trade back up to Friday’s closing level where it is now stalled. To the topside, the next resistance level is the 1.3182 level while the 1.3134 level below is the first key support.