GBP Bulls Given Fresh Optimism Britain Can Get a Deal with the EU Citing a German Official

GBP in the second half of the session on Thursday received an additional boost, thanks to some commentary from Germany’s ambassador in Brussels.

Michael Clauss, said that as it stands there has been “no real progress” in the talks at present, however, did indicate that they will become the EU’s main political focus between September and October.

He was speaking at an event hosted by the European Policy Centre thinktank and said:

Is a deal possible? Yes, definitely. But I think it also means that UK needs to have a more realistic approach. To put in short, I think you cannot have a full sovereignty and, at the same time, full access to the internal market. So this Brexit issue is going to absorb a lot of political or most of the political attention we expect in September and October.

At present, the two sides remain in a stalemate regarding the access for European fishing fleets to UK waters and whether in return for a zero-tariff trade deal, that the United Kingdom needs to be tied into the EU’s developing state aid rules and common environmental, social and labour standards.

What does this mean for GBP?

The markets at present appear to be disregarding the current stalemate between the EU and Britain, despite the risk of a no-deal. The risk-appetite theme has dominated the FX space, allowing GBP to fly. Attention will likely shift back onto Brexit heading towards the end of this month - June, the deadline for the UK to ask for an extension.

The government has made it clear they will not ask for one which is a GBP negative, however this has been priced in by the markets. GBP volatility will be very likely there on driven by the coming rounds of further talks between officials. Unless either party walks away from the talks, a harsh GBP sell-off is unlikely, until and only if a no-deal becomes incredibly unlikely closer towards the end of the year. Dips and pullbacks, for now, likely to be bought unless greater negative commentary occurs from either side.


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