On Tuesday evening, UK Cabinet Office Minister Gove said that he was pleased to announce an agreement in principle on all issues of the UK-EU Joint Brexit Committee. The EU and the UK agreed in principle to an agreement on Ireland and Northern Ireland.
At the same time, according to market news, the UK said it would withdraw Articles 44, 45 and 47 of the Internal Market Act and would not introduce any similar provisions in the tax bill.
At the news, GBP/USD rallied by nearly 100 pips in the short term, returning to the 1.33 level and hitting 1.3390.
The EU and the UK reached an agreement in principle on all issues, especially on the agreement on Ireland and Northern Ireland. In addition, the two sides reached agreement in principle on the following areas: special border control points/entry points for the inspection of animals, plants and derived products; export declarations; the supply of pharmaceuticals; the supply of frozen meat and other foodstuffs to supermarkets; and clarification on the application of state aid under the terms of the Protocol.
In light of the agreed solution, the UK will withdraw sections 44, 45 and 47 of the UK Internal Market Act and will not introduce any similar provisions into the tax bill.
This means that the U.K. and the EU have broken the deadlock on the Brexit deal and resolved the outstanding issues on the Irish border, which is a key step in reaching a final Brexit agreement.
But it does not mean that the two sides can finally reach an agreement. Earlier, British Prime Minister Boris Johnson also said that the United Kingdom and the European Union to reach a trade agreement “currently looks very difficult.
As the clock ticks down and a Brexit deal becomes more urgent, Johnson and European Commission President Von der Leyen failed to reach an agreement after one-on-one talks yesterday. Johnson will soon leave for Brussels to meet with EU leaders in an effort to break the deadlock in negotiations over the trade deal.
Peter Kinsella, head of forex strategy at Union Bancaire Privee, a Swiss asset management firm, said people will be trading on every Brexit-related news in the next few days. The pound has strengthened against the dollar over the past week, masking the growing anxiety beneath the surface, and the price of options that protect investors from the pound’s massive volatility has steadily climbed.
Mimi Rushton, co-head of global FX distribution at Barclays, said that continued hope for a deal means the pound has room to fall if last-minute negotiations don’t seem to be going well.
Analysts point out that if no deal is reached, the pound will fall by up to 6 percent against the dollar in a few days; if a deal is reached, the pound will rise by 2-3 percent. Mitsubishi UFJ, on the other hand, believes that if there is no deal, the pound will plunge 8% against the dollar within a week. Freddie Lait, chief investment officer at Latitude Investment Management, said the pound will move higher in the short term, and if an agreement is reached, the pound will rise 5-6 percent.
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