GBP has been trading higher today on continued hopes that the UK will be able to agree to a Brexit deal with the EU. Michael Barnier, the EU’s chief negotiator, told reporters on Tuesday morning that although “big gaps” remain between the two sides, a deal is “still possible this week”. Speaking in Luxembourg ahead of a meeting with EU leaders later today, Barnier struck an optimistic tone saying that although time-wise it is becoming “more difficult” to do a deal, it was “time to turn good intentions into text”.
Barnier’s meeting with EU leaders today is the latest in a string of meetings recently which have seen discussions intensifying ahead of the EU summit which starts on Thursday. On Monday, there were 12 hours worth of talks, highlighting the effort that leaders are putting into attempting to resolve the situation.
Irish PM Confident Over Deal
Last week, Boris Johnson met with the Irish Taoiseach, Leo Varadkar. The meeting proved positive with both Johnson and Varadkar saying that they believe a deal could now be possible. Speaking this morning, Barnier said:
“Reaching an agreement is still possible but obviously any agreement must work for everyone – for all of the UK and the whole of the EU”.
However, not all leaders feel as confidently. Antti Rinne, the Prime Minister of Finland who currently holds the EU’s rotating presidency met with European Council president-elect Charles Michel this week. On the back of the meeting Rinne said:
“I think there is no time in a practical or legal way to find an agreement before the EU Council meeting. We need more time.”
Northern Ireland Still Key
With the EU and the UK still heavily divided over how to handle the issue of how Northern Ireland should be classified following Brexit, there are reports that the EU is considering holding a further Brexit summit later in the month. As such, the EU would likely issue a statement at the coming summit saying that progress has been made but more time is needed.
However, if this is the case, the UK PM would need to request an extension to Article 50, as per the Ben Bill. If the EU is not ready to sign off on a deal though, it is not yet clear if Johnson would try to push ahead with a no-deal Brexit.
Leaders Focused on Delivering A Deal
Despite the differences still remaining, the reality of a no-deal Brexit seems to have had an effect on the attitude of officials on both sides. There has been a much more determined tone to meetings noted over the last few weeks. The EU is clearly in favor of delivering a deal. Although for now, they are still pushing for a Northern Ireland Backstop whereby, following Brexit, Northern Ireland continues to be treated under the single customs union with an eventual exit date. However, so far, the UK has been adamantly against this option. Unless Johnson is willing to accept this, it seems that negotiations will need to continue. For now, at least, it seems as though a no-deal Brexit is less likely as the focus remains on delivering a deal.
The breakout in GBPUSD over the last few sessions has seen price trading up above the bearish trend line from year to date highs and is now testing the 50% retracement from those highs. While we remain above the 1.3485 level, focus remains on a further push higher with the 1.2768 level the next area to watch ahead of the 61.8% retracement at the 1.2836l level. While the short term bullish channel hold, we are likely to continue higher.