Summary:
- UK PM May backs down on backstop option regarding Irish border
- Davis stays on as Brexit secretary
- GBPUSD pulls back from 2- week high
There’s been a fairly strong move lower in the pound this lunchtime after the announcement that UK PM May has agreed to add a time limit in the Brexit backstop paper, following intense pressure from David Davis. It had been touted that Brexit secretary Davis may hand in his resignation if May wouldn’t cede on this, but the PM seems to have backed down on this one.
GBPUSD pulled back from its highest level in more than 2 weeks this morning after news broke that the UK would add a time limit to its Brexit backstop option. Source: xStation
As one of the most prominent Brexiteers in the cabinet, Davis staying in his role has seemingly stopped the government moving closer still to a “soft” Brexit and this has seen a quick swoon the pound, although it has subsequently pared some of the losses. The daily chart shows that the recent recovery has seen price move up to the 23.6% fib of the large decline from the April high and this region around 1.3475 also coincides with a swing low from the end of April.
GBPUSD may have run into some resistance around the 23.6% fib at 1.3475. Source: xStation
The government has now published its paper on the temporary customs arrangement which includes the following important points:
- UK will leave customs union when it leaves EU
- Irish backstop should come to an end in Dec 2021
- UK to apply the same rules as EU during implementation period
- Backstop would apply to customs arrangements between UK, EU
- There is a range of options for how limit could be done
- UK says backstop will need to address regulatory standings
The EU has wasted little time in responding to this with chief negotiator Barnier tweeting in the last few minutes.
Barnier has wasted little time in responding to the UK’s latest proposals. Source: Twitter