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- EU reportedly ready to make concession to secure Brexit deal
- But immediate DUP response pares gains
- Parliament to sit next Saturday, laying ground for deal's approval
- Sterling headline driven, expect volatility
News reports that the European Union might be willing to offer the UK significant concessions in order to secure a Brexit deal have been attributed to a bounce in Sterling in mid-week trade.
According to a report in The Times, the EU is ready to make a major concession on a Brexit deal by providing a mechanism for the Northern Irish assembly to leave a new Irish backstop after a set number of years.
Diplomatic sources close to the talks told The Times that European governments are prepared to concede a unilateral revocation of the withdrawal treaty by Stormont after a period of time.
The date of 2025 has been mooted, as long as both communities in Northern Ireland agree to it. "A landing zone on consent could be a double majority within Stormont, to leave, not to continue with the arrangements after X years," a source told the newspaper. It is currently proposed that Northern Ireland will remain a member of the EU's single market for a number of years, but this can be extended if Stormont so approves.
The EU appear to be proposing that both parties will instead have to vote to leave the single market. We suspect the EU know the Nationalist community - largely represented by Sinn Féin - would not concede to such an outcome as it would create a divergence with the Irish Republic.
Regardless, markets see progress, which makes for a stark contrast to yesterday's headlines that suggested talks were on the precipice of failure.
"The rally is off of headlines from The Times piece this morning which states the EU are ready to make major concessions by allowing a time limit to the backstop - something that was unthinkable back when May tried to pass the withdrawal treaty back in the early parts of 2019," says Simon Harvey, analyst with Monex Europe.
The response of Northern Ireland's Unionists - largely represented by the DUP - will be key in indicating whether this proposal would fly.
The initial response from the DUP is decidedly cool.
"It will go nowhere. The Government in Westminster will not accept it, we will not accept it," says Sammy Wilson, DUP Brexit spokesperson. "I don't think anyone who looks at it with any kind of objectivity at all will say it's an improved offer".
DUP MP Jeffrey Donaldson says the offer is a reheated version of the initial Brexit deal that has already been rejected.
The comments might coincide with Sterling's apparent reversal off the post-headline highs.
"For now, the rally is capped because the headlines are unconfirmed by EU leaders, but if true, this shows that Johnson's hardline stance may have paid off. The move to allow a double majority on the Irish backstop means the path of getting a deal through Parliament could be smoother," says Harvey.
The UK Government has meanwhile given a strong sign of intent that they intend to bring a revised Brexit deal back to Parliament after announcing on Wednesday an unusual weekend sitting of the House of Commons will take place on Saturday, October 19.
The two develoments appear to have coincided with a spike in the value of Sterling.
The volatile currency moved higher on the news that the Government intends to hold a sitting of Parliament on the Saturday as this is a day after the European Council summit concludes, suggesting the Government is prepared to use this date to present Parliament with a revised Brexit deal.
That a deal is still on was clearly well received by the foreign exchange market that bought Sterling in response.
Government sources told Reuters ministers are planning to call the Parliamentary session on October 19, regardless of whether the Prime Minister is able to win an agreement from EU leaders on a Brexit deal.
The summit in Brussels on October 17 and 18 is crucial as it is the last scheduled meeting of leaders throughout the bloc before Britain is scheduled to leave on October 31.
However, we caution that failure to get a deal could also offer Parliament the cache to vote Johnson's Government down in a vote of no-confidence. The Prime Minister would equally welcome such a move as it potentially prevents him from having to ask for a Brexit extension, allowing him to walk into an election without having have had to delay Brexit once more.
His calculation is that such an outcome would boost the Conservative's prospects in a snap vote.
We are clearly in a headline driven period for Sterling, meaning the only thing we can be sure of in the short-term is that volatility is likely to remain elevated.
So expect strength and weakness to ultimately be faded.
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