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Thursday 1st January 1970

T Minus 365

Standing at three hundred and sixty five days and several hours long, the countdown to Brexit day may seem somewhat more elongated than the renowned countdown of a space shuttle launch… but the task ahead is no less immense. On this day, at midnight, in 2019, the UK is destined to leave the European Union.

 

At the moment, the only fuselage that the nation has standing between itself and the entropic international political economy is a transitional deal, allowing the UK to engage with the bloc under a virtually unchanged dynamic through 2020. This agreement should be enough, but it will be imperative that the political authorities exploit and exercise their allowances during the transitional deal.

 

Following the publication of a 130-page document, highlighted more than a second hand GCSE Chemistry textbook, the transitional deal between the UK and the EU finally looks clear and tangible. While the document is filled with jargon and a bias to defend the EU’s beloved acquis communautaire, solace can be found on two major points.

 

While institutions still reign supreme during the arrangement, a promise to resolve conflict “through cooperation and consultation” before seeking formal support is good for the UK. Its inclusion invites the possibility that the future relationship between the United Kingdom and the world’s largest single market may be governed on mutual terms; not commanded by the ECJ.

 

This message, buried on page 105 of the document, sits nicely with the EU’s commitment to good faith. Sitting more prominently as Article 4A, the Draft Agreement states that both negotiating parties have agreed, subject to legal ratification, to prioritise good faith and support each other’s endeavours, where possible, towards the achievement of tasks that flow from the agreement.

 

The second major root of optimism from the transitional deal is the capacity for the United Kingdom to negotiate, although not implement, its own bilateral, or multilateral, trade deals. Whilst receiving far less recognition in the formal Draft Agreement, the rhetoric surrounding the release has attested to Michel Barnier’s change of heart surrounding the permissibility of this freedom.

 

The potential for trade negotiations is what is supporting the Pound at the top end of its channel trade against the Euro. This morning, the Euro is trading around 1.1425; below the post-BoE decision highs of 1.1530, yet at a cheaper value that we have seen in months.  However, as is always the case, the capacity to generate meaningful trade deals with third countries will be what truly breaks the Pound from its slumber. Cable has been dominated by the Dollar story this week – moving multiple cents within one day. This morning, the Dollar has opened relatively flat against the Pound, trading around 1.4075.

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