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GBP: Guided by the UK politics - BBH

Sterling continues to knock on the ceiling that has capped it since the beginning of October (~$1.3340) and a convincing break targets $1.3420, according to analysts at BBH.   

Key Quotes

“It seems to be more a reflection of dollar weakness than sterling strength.  Sterling is slipping easing against the euro for the fourth consecutive session.   Still, since the middle of September, sterling has been alternating between weekly gains and losses against the euro.”   

“The UK appears to have made progress on two of the three issues that the EC is demanding.  A resolution of EU citizens' rights post-Brexit appears near, and the UK appears willing to improve its initial financial offer.  The Irish border remains an important sticking point.  The UK is testing the waters to push off the issue until later by granting Ireland a "process veto."  This would allow Ireland the right to veto the Brexit agreement at another stage and grants that "nothing is agreed until everything is agreed."   

“The EC appears to see this as promising, but not apparently not sufficient. It is afraid the UK will later try to use it as a negotiating chit, and the EC apparently does not want to surrender so much to Ireland.   Note too that the Irish government (a minority government) is having its own challenges.  Fianna Fail, the main opposition party, withdrew its support for Deputy PM Fitzgerald over that her actions in the previous government over the police scandal.  It is a delicate balancing act for Prime Minister Varadkar and a wrong turn, could see his government collapse.”   

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