Wednesday, 23 January, 2019

May Strikes Financial Services Deal with European Union by Agreeing 'Equivalence' After Brexit

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Nellie Chapman | 02 November, 2018, 16:45

"We now need to acknowledge the progress that has been made and now work rapidly through the remaining issues and come to an agreement that works for both sides".

"It is now Theresa May's stance which is most closely aligned to those principles - while the European Union has fundamentally misinterpreted the principle of consent which underpins them".

Citing several diplomats familiar with the plan, the paper said Northern Ireland would remain in a deep customs union with the bloc, applying the union's full "customs code" and following single market regulations for goods and agri-food products. "Despite remarks by Theresa May's spokesman that the reports over a services deal were speculation, the latest report kept GBP-bulls in the driver's seat", says Charalambos Pissouros, Senior Market Analyst with JFD Brokers.

In a letter to a parliamentary scrutiny panel, he wrote: "I would be happy to give evidence to the committee when a deal is finalised, and now expect 21 November to be suitable".

Free movement of people will continue temporarily following a no-deal Brexit, Sajid Javid suggested yesterday.

The bank could be forced to raise interest rates, depending on how the pound reacts, he said.

Separately, Raab´s predecessor David Davis, who quit over the government´s approach to Brexit in July, said the final deal will likely pass when it comes to a vote in the House of Commons, before retracting himself a day later.

Such a move would leave millions of borrowers facing higher costs for mortgages and other loans at a time when the economy may be slowing.

Brexit Secretary Dominic Raab has told MPs he expects a deal on the UK's exit from the European Union by 21 November, and said agreement on the Irish border issue was "not far off".

The implication is that a period of longer-term Dollar strength might be ending; this bodes for GBP/USD strength ahead, particularly in the event of a Brexit dealing being struck and a smooth exit being secured.

The pound jumped following The Times report, reaching $1.2905 by 1150 GMT and extending gains after the Bank of England hinted at a slightly faster pace of interest rates increases.

On Monday (29 October) Chancellor Philip Hammond stressed the importance of getting a deal, saying this would dispel uncertainty weighing on businesses and allow him to spend money he is holding back as a reserve. On release front today, United States markets will see release of NFP report, dropping at 12:30 GMT and markets will be coiling ahead of the key jobs report, but before that will be the UK's Construction PMI for October (forecast 52.0, last 52.1), at 09:30 GMT.

The Bank expects UK GDP to grow by around 1.75 per cent a year on average in the coming years.