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- Barnier-Raab press conference due in early afternoon
- Outcome could have bearing on Pound Sterling ahead of the weekend
- Pound-to-Euro exchange rate @ 1.1144, Pound-to-Dollar exchange rate @ 1.3021
Pound Sterling is in focus ahead of the weekend with the two Brexit negotiation principles Dominic Raab and Michel Barnier due to meet in Brussels to take stock of the Brexit negotiations.
The meeting is said to be scheduled to last for six hours and is preceded by technical workshops held by EU and UK teams on Wednesday 29th and Thursday 30th that sought to make progress on the remaining issues of the Withdrawal Agreement and the future relationship.
We are looking for Raab and Barnier to address the media following discussions with a press conference being loosely pencilled in for 13:15 B.S.T.
.@MichelBarnier will meet @DominicRaab this Friday @EU_Commission to take stock of the #Brexit negotiations. This will be preceded by technical level negotiations on the Withdrawal Agreement and the future relationship: https://t.co/q2O3W5EImX pic.twitter.com/5DzUFsQaQe— Daniel Ferrie (@DanielFerrie) August 29, 2018
On Thursday evening, Raab met with the European Parliament's Brexit representative, Guy Verhofstadt.
The former Belgian prime minister called the meeting "productive", tweeting that he wanted a "close future association" with the UK after Brexit that "respects the EU's core principles".
Verhofstadt is a man Raab will want on his side as he will ultimately corral the European parliament towards accepting or rejecting any deal.
Productive meeting w/ @DominicRaab. I outlined the @Europarl_EN's position, the need for a full continuation of the rights of EU & UK citizens & a solution to avoid a border on the island of Ireland. We want a close future association that respects the EU's core principles. pic.twitter.com/LBOBbxV8u8— Guy Verhofstadt (@guyverhofstadt) August 30, 2018
What's at Stake for the British Pound?
The tone set by today's media briefing could well determine whether the better sentiment towards Sterling can be cemented.
Indeed, ahead of the weekend Sterling is enjoying a strong week-on-week outperformance against the majors:
Above: The Pound was the best-performing major currency for the week-to-date.
The gains came as markets pare back some of their negative exposure to Sterling which had left the market's bet against the currency looking overcrowded.
Often when overcrowding in a particular bet takes place some kind of strong countertrend move can suddenly take place on even the slightest trigger.
That trigger proved to be a series of good news events concerning Brexit negotiations, most notable of which was EU negotiator Michel Barnier saying "the EU is preparing to offer a partnership with Britain such has never been with any third country."
The constructive note struck by Barnier surprised markets which had been increasingly become wary of a 'no deal' Brexit, and allowed them to engage in a bout of Sterling buying as they exited bets against the currency.
The Pound-to-Euro exchange rate - widely considered to be the best and purest gauge of Sterling sentiment towards Brexit - was seen hitting its best exchange rate since August 21 at 1.1153 on further indications of high-level EU manoeuvres to secure a Brexit deal.
A report in the Times says French President Emmanuel Macron "is preparing to throw Theresa May a lifeline by pushing other EU leaders to agree a close relationship with Britain after Brexit as part of his vision for a united Europe."
Macron is reportedly set to use a summit in Austria next month to spell out a new structure for European alliances. It would be based on “concentric circles”, with the EU and the euro at its core and Britain in a second ring.
The Times quoted diplomatic sources as being behind the claims which are significant if we consider Macron's influence over European policy.
We now look for the positive tenor of this weeks developments to be cemented by the principles at today's meeting in Brussels.
Failure to do so could well deal a blow to Sterling bulls ahead of the weekend.
"We anticipate the EU and the UK will strike a withdrawal/transition agreement, including on trade. GBP/USD will struggle to materially appreciate while Brexit uncertainty remains," says Richard Grace, Chief Currency Strategist at CBA.
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