New Brexit Proposals On The Table
As the October 31st Brexit deadline draws closer, there is still a great deal of uncertainty about how the UK will leave the EU or if it will at all. Under new legislation passed recently by MPs (Benn Bill) parliament now has until October 19th to approve a Brexit deal or to give permission to the Pm to effect an exit from the EU without a deal. If MPs cannot agree on a deal or get behind a no-deal Brexit, the PM will be required to request an extension from the EU. Under this outcome, Brexit would be postponed once again until January 2020 firstly.
Although the UK PM has repeatedly said that he is prepared to leave the EU without a deal his tact has shifted in recent days and Johnson is now working hard to agree on a deal. Johnson vowed to take the UK out of the EU on October 31st when he took office and his current efforts suggest that is still his goal.
On Tuesday, the PM pitched a new set of proposals which will be submitted to EU leaders today, specifically over the contentious Irish backstop issue. The issue of how Northern Ireland will be treated following Brexit has been the main stumbling block for negotiations, both domestically and with the EU.
Johnson has come under criticism recently from across the political divide and has been accused of not wanting to do a deal. However, Johnson told reporters this week “we are working flat out to get a deal” and against claims of not wanting to do a deal, said, “this is completely untrue, I really must stress it is the absolute inverse of reality”.
Irish Backstop Alternative
As part of the new proposals, Johnson is backing a single regulatory zone for agricultural goods on the island of Ireland. This would negate the need for sanitary and phytosanitary (SPS) checks on the Irish border for roughly 30% of trade between Northern Ireland and the Republic, and by around 70% of it by flow.
UK media has reported EU sources as saying that if support for a single regulatory zone could be agreed for agricultural goods, this would then be extended to manufactured goods, which would solve a great deal of the issues over how the border should be handled.
In terms of how customs should be handled, Johnson’s new proposals suggest that customs posts could be used on either side of the border which would avoid the need for a hard check on the border.
Johnson’s amended Brexit deal will be discussed by EU leaders before a decision as to whether to ratify it or not at the upcoming EU summit on October 17th. If the deal is approved and Johnson can pass it through parliament, the UK would continue with the current exit date of October 31st. However, it is not clear yet whether the EU will approve Johnson’s new proposals given how stringent EU leaders have been around the issue of the backstop in the past.
The British Pound has been sold this week as growing uncertainty keeps investors confused around the likely outcome of Brexit. A BOE policymaker warned last week that the BOE could be forced to cut rates ahead of any Brexit decision should the ongoing uncertainty warrant an intervention. As GDP contracted 0.2% in Q2 there is now a high risk that the UK could enter a technical recession if Q3 is seen to have contracted also.
Technical & Trade Views
EURGBP (Bearish below .8932)
EURGBP From a technical and trading perspective. EURGBP is retesting offers between the yearly pivot at .8890 and monthly pivot at .8930. I am anticipating a further breakdown, in line with longer term VWAP signals and will be monitoring price action for short opportunities targeting breakdown below the yearly S1 at .8700.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!