All Eyes on Boris Johnson’s Final Brexit Proposal

Xe Corporate UK

October 2, 2019 2 min read

The two biggest takeaways from yesterday were Prime Minister Boris Johnson preparing to be flexible on Irish customs checks, and although not revealing too much detail, insisted that new customs checks won’t need new infrastructure. Shortly after, the EU announced it is willing to consider a time limit to the Irish backstop and could be willing to give the Irish assembly a say in leaving the Brexit backstop.  Next, the pound spiked to highs of the day, before shortly receding back.

Looking forward to today, all eyes will sharply focus on Boris Jonson’s speech at the Tory Conference, as he reveals what is expected to be his final Brexit proposal. PM Johnson has received a needed boost from the DUP, signalling that they are largely “content” with the revised separation terms. How the EU and the markets react to the final offer will be crucial.

Initial reactions from the EU on leaked plans suggest that should the final offer resemble the draft (something that Boris Johnson denies), there could be a frosty reception and the looming reaction could have a substantial bearing on Sterling – a fierce rejection could sink all prospects of actually sealing a deal. With an increase in expectations for a ‘no-deal’ would come an increase in downward pressure on Sterling.

Other highlights from yesterday –

Nationwide, housing prices increase dropped to 0.2%, German Manufacturing PMI dropped to 41.7, EU Manufacturing PMI dropped to 45.7, US Manufacturing PMI increased to 51.1.

There won't be many data releases today – UK Construction PMI comes out this morning, and a collection of mortgage-related data from the US. As described above, all focus will be on Boris Johnson’s final Brexit offer.

Rates at time of writing:

GBP/USD – 1.2272

GBP/EUR – 1.1239

EUR/USD – 1.0919

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