GBP vulnerable to EU's response to May's latest plans

The GBP has rallied recently for two reasons:

  1. The Conservative party conference was not a disaster for Theresa May. She managed Boris very well and even had a little dance on the stage. She was confident and assured in her final speech on Wednesday and looked like she was actually enjoying herself. This was not a disaster for May.
  2. May released an emerging back-stop plan for an all-UK customs union within the EU that was see by the markets as a positive step in resolving Brexit.

The GBP rally has been further fuelled with Ireland giving it's backing to May's backstop plan. However, the EU has previously rejected May's Irish border plan and the situation is far from clear. There could easily be another rejection form the EU of this latest offer from May. In fact on the 4th of October the European Council's president Donald Tusk offered a Canada 'plus plus plus' deal for the UK. It was the EU saying , we want to deal with you like this, rather than accept May's chequers plan which they threw out at Salzburg.

So, it is all very tricky. Although folks are getting more confident of a deal being done it is worth having your ear to the wires for a rejection of May's latest proposals from the EU. The next key meeting is on the 18th of October at the EU summit. In the run up to this meeting watch out for any publication of May's latest Irish border plan and the reaction from the EU. We are not out of the woods yet and more downside could well be ahead for the GBP in the run up to the summit on the 18th of October. Keep alert for short term opportunities on the GBP. There are likely more twists and turns still to come.