How Will the EU Respond to Boris Johnson's Proposals?

Addressing the Conservative Party Conference yesterday, Prime Minister Boris Johnson echoed the Conference’s key slogan and Chancellor’s comments from the start of the week, emphasising once again “let’s get Brexit done on October 31st”.

The Government delivered its new Brexit proposals to the EU, which include plans that would see Northern Ireland stay in the European single market, but leave the customs union, which in turn, would see new custom checks, supported by new technology.

The proposals were received with mixed reviews, but most notably those from Irish Taoiseach Leo Varadker were “not promising” and “would not be basis for agreement”. With that said, Sterling appears to be a little sturdier against its key competitors this morning, and trading between increasingly finer ranges compared to the start of the week, suggesting apprehension in the markets as investors wait with bated breath in whether the EU will reject the proposals.

Should the proposals be accepted, then ultimately that would prove positive for the Pound, and result in upside movements. However, should the ‘make or break’ deal be rejected, then of course that would be negative news for Sterling.

The currency would have some downside support however, from the Parliamentary Act that effectively eradicates the possibility of a ‘no-deal’ on October 31st (although the ongoing uncertainty is giving drag to its performance). One glimmer of hope Johnson could hold on to is that the lack of immediacy in response from the EU so far could prove that something workable in the background is occurring.

Standing in Brexit’s shadow – US trade talks. The White House Director of Trade and Manufacturing Policy, Peter Navarro, has not painted a promising picture of the up-coming US trade talks, having colloquialised the term “seven deadly sins” – issues they claim to be facing in dealing with China.

In yesterday’s key data releases: UK Construction PMI decreased to 43.3 and US mortgage applications had increased 8.1%.

A big day of data ahead of us today: we have already seen a variety of key releases from Australia, mostly positive, UK Services PMI, Composite and Services PMI data from France, Germany and the EU, retail sales from France and the EU, and from the US; jobless claims, Composite, Services Manufacturing and non-Manufacturing PMI data.

Values at time of writing:

GBP/USD – 1.2293

GBPEUR – 1.1231

EUR/USD – 1.0945

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