Here we are at another weekend and where is our Brexit deal? ‘Up in the air’ isn’t a bad answer. As for the main protagonists responsible for getting it across the line, and even that phrase feels over-optimistic at this stage, they are preparing for a weekend of talks, that will not (officially) include Brexit at the incongruous venue of Egypt’s Sharm el-Sheikh resort.
Something might be afoot though. There has been a distinct strain of anticipatory optimism in the usual mixture of anonymous despatches and only ambivalent comprehensive comments to the press over the last few days. Even that has pretty much faded now, of course. Even so, the suggestion that something is taking shape is a reasonable one, particularly after Chancellor Philip Hammond, usually a source of even-handed assessments, emboldened enough to insinuate he would consider stepping down if the government advances towards no-deal. It was a first from the country’s top economic minister and can be read in more than one way, including that he’s increasingly certain it’s a threat he won’t need to carry out.
The crux of the possible breakthrough is work that is reportedly underway to create what diplomats have called a “parallel declaration” or “interpretative instrument”, that clarifies the obdurate sticking point of the current Brexit deal in terms of Parliamentary agreement, the Northern Ireland backstop. Crucially, officials are also sending signals saying the government has effectively given up a head-on attempt to get the EU to re-open discussion about the backstop itself. Brussels would, apparently, rather become a protectorate of North Korea than do that. Despite this new, flimsy optimism, hopes of a new deal by next week’s ‘meaningful vote’ on 27th February – (and if at all) – have largely been dashed. So, Friday sees further Conservatives putting their heads above the parapet in rebellion, though not by leaving the party. Instead, some have stated more plainly that they would vote against the government—possibly by backing the Yvette Cooper amendment that will be in focus next week, to delay Brexit—instead of facing a no-deal scenario.
Vague currents that could pull Brexit back to a softer landing have seen markets hold off from pricing the likelihood of sharper volatility back in. This has enabled sterling traded against the dollar to hover comfortably around the $1.30 handle whilst posting its first positive week after three declines. GBP/USD was up 1.4% for the week by the end of European trading and above its roughly $1.3010-$1.3060 range to the upside for the first time since late January. Friday’s $1.3080 high was distinctly toppy in the short-term view, so if not surpassed by close of business will be a focal point, and possible resistance next week.
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