The report, which featured in today’s Times, said the EU were prepared to offer the Northern Irish assembly a mechanism allowing them to leave the backstop after an unspecified number of years. However, the Democratic Unionist Party (DUP) dismissed the proposals, causing pound sentiment to slide. EU officials then condemned the report as untrue, with one senior diplomat dismissing the news as “spin” and another official saying “no bold new offer is coming from the EU side at this stage”.
Commenting on the pound’s movement, head of economic research at Daiwa Capital Markets, Chris Scicluna noted:
“Sterling had fared better and rebounded this morning but is now falling back again. This shows that there is a recognition that there isn’t a substantive breakthrough in the Brexit talks.”
Meanwhile, the single currency edged up against Sterling as another deterioration in US-China relations and the damage protracted trade tensions might inflict on a fragile global economy saw investors favouring safe-haven currencies like the euro.
Even as face-to-face talks proceeded between the two superpowers, the US imposed visa restrictions on Chinese officials and added 28 Chinese companies to a trade blacklist, citing as the reason their alleged involvement in the abuse of Muslim minorities – a charge Beijing vehemently denies.
Looking ahead, the GBP/EUR exchange rate is likely to be left muted on Thursday morning with the release of German data which analysts predict will disappoint.
A contraction in German exports for August could cause the single currency to slide against the pound, while a concurrent decline in UK GDP could see Sterling slump, with the pairing left muted.