Barnier's Brexit comments weaken Pound

Yesterday’s markets

9th February 2018

  • AUD - RBA Gov Lowe Speaks
  • GBP - Monetary Policy Summary
  • GBP - Official Bank Rate

UK Prime Minister, Theresa May has continued meeting with her Brexit Cabinet Committee to discuss how the future relationship between the UK and the EU would look. She plans to remove some of the EU rules immediately after the UK leaves the bloc. One of the rules the UK would be looking at removing is the EU customs regime, as it would allow the UK to make its own trade agreements with other countries. The EU are expecting the UK to clarify their ideas on the future relationship tomorrow.

Today’s markets

8th February 2018

  • GBP - Manufacturing Production m/m
  • CAD - Employment Change
  • CAD - Unemployment Change

EU’s Chief Brexit Negotiator, Michel Barnier, spoke earlier today causing the Pound to weaken against its major counter parties. In the press conference, he mentioned the transition period the UK wanted was not a given if the disagreements between the two sides continue and that transparency is important to the EU in the negotiations. Barnier continued to say there had been substantial disagreements over the terms of the transition period. He also touched on the Northern Ireland issue which has been a sticking point throughout the discussions. He believes the Irish-board solution must be precise, clear and unambiguous. These comments today come as a draft document produced by the EU was leaked yesterday. The draft EU proposal, see Northern Ireland staying within the Single Market and customs union after Britain leaves the EU. The document also suggested during the two-year transition period, any disputes between the two sides could see the UK have sanctions placed against them.

Bank of England Deputy Governor, Ben Broadbent reiterated Governor Mark Carney’s comments from yesterday in an interview earlier today. Broadbent still believes any rate hikes should be ‘limited and gradual’, however he does believe the hikes might occur sooner than previously anticipated. The hawkish comments come as the UK see more positive growth in wages and employment. Markets are now anticipating the BOE will raise rates in May if the economic data remains bullish and there could be three rate hikes over the next three years instead of the two previously forecast.