Following Barnier’s comments, markets also moved to bet on a slightly faster pace of tightening from the Bank of England, fully pricing in an interest-rate rise in November 2019. BOE Governor Mark Carney has previously said that the central bank’s future path will be dependent on the outcome of Brexit.
With talks at a virtual impasse for weeks, the two sides are rushing to try to reach a deal on the terms of the U.K.’s withdrawal by October, although Brexit Secretary Dominic Raab said Tuesday there was some flexibility on that deadline. Raab is due to head back to Brussels for negotiations on Friday.
“Traders have become very concerned about negotiations in recent months, particularly the increased talk of no deal Brexit and these comments will at least start to alleviate those concerns,” said OANDA Europe Ltd. analyst Craig Erlam. “It does suggest that more constructive conversations can happen to find a workable solution that suits both sides, should one exist.”
The tone of commentary focusing on Brexit has been to highlight the brinksmanship the UK administration has been engaged in and that may have paid off with the EU starting to edge towards compromise.
The Pound has been very oversold versus the Euro and needed a thaw in relations with the EU to provide a catalyst for short covering. That now appears to be underway against the Euro and a reversionary rally started against the US Dollar in mid-August.
The FTSE-250 Index has bounced from the region of the trend mean. It needs to hold the 20,000 level, during any consolidation, if the benefit of the doubt is to be given to continued higher to lateral ranging.