Just as news broke that the pound had rallied today following confirmation that a long-awaited Brexit deal had been reached, the cable reversed its gains.
- GBP/USD was down 0.2% at 1.2791 from an earlier high of 1.2988 – Gains were capped after DUP said it remains opposed to the proposed agreement, therefore suggesting it is unlikely to be passed by the UK Parliament
- EUR/GBP up 0.68% to 0.8682 from earlier low of 0.8576 – at the time of publishing
- DUP say they can’t support a deal
- EU side appears more optimistic
- GBP stands to add further gains if the deal is struck, but faces Parliamentary resistance
The European Union Commission President Jean-Claude Juncker and UK Prime Minister Boris Johnson both confirmed the news earlier via twitter. However, hopes for a Brexit deal were dealt a serious blow after Northern Ireland’s Democratic Unionist Party said it will vote against a Brexit deal.
The pound rallied to its highest since May earlier after Britain had managed to reach a last-minute deal with the EU.
But quickly, the pound’s impressive gains quickly turned to dust after the markets switched focus from Brussels to London where reactions by MPs suggested the deal will most likely fail in Parliament.
DUP are refusing to support the deal ‘as things stand’, citing issues with VAT arrangements and customs checks in the Irish Sea.
As a result, the pound has been left on the back foot leaving investors underwhelmed about which way the market will swing.
However, DUP leader Arlene Foster claimed she would be willing to continue working with the Government in an attempt to try and secure a deal they could back.
In a written statement, Foster said:
We have been involved in ongoing discussions with the Government. As things stand, we could not support what is being suggested on customs and consent issues and there is a lack of clarity on VAT.
We will continue to work with the Government to try and get a sensible deal that works for Northern Ireland and protects the economic and constitutional integrity of the United Kingdom.
Investors, global markets, and indeed most likely the entire world were hoping an agreement would be ready to be put before the EU leaders for a final sign-off, in hopes of ending the ever-lasting Brexit shambles.
However, with the DUP finally speaking up, it appears the optimistic prospect of such a deal being achieved has sadly faded.
TIOmarkets Chief Dealer David Hannigan offers his insight on the situation:
Should PM Boris Johnson fail to bring the DUP on-board, his deal will most likely be rejected through Parliament during tomorrow’s anticipated Brexit debate.
This Saturday, Parliament will then hold a Meaningful Vote – it’s fourth on a Brexit deal.
If the deal is passed, MPs will vote on the Withdrawal Agreement Bill, which would enact the UK’s exit from the EU.
Only time will only tell. If there’s anything certain, it’s that anything is possible when it comes to Brexit.
Investors and traders watch from near and far and await news of the impending summit.