Pound Pares Gains as Brexit Hangs In The Balance as EU Doubts a Deal this Week, UK Departure Date Looms

A deal to smooth Britain’s departure from the European Union hung in the balance on Monday after diplomats indicated the bloc wanted more concessions from Prime Minister Boris Johnson and said a full agreement was unlikely this week.

Monday sees the British Pound pare some of the impressive gains recorded last week, amidst news that a Brexit deal between the EU and UK still remains some way off.

GBPEUR Currently still trading in positive territory up over 3% since last week sitting at 1.1388 off a daily high of 1.1439. GBPUSD also trading up over 3% from last week at 1.2563 off day highs of 1.2617.

Boris Johnson and EU leaders face a tumultuous week of reckoning that could decide whether the divorce is orderly, acrimonious or delayed yet again.

Johnson says he wants to strike an exit deal at an EU summit this Thursday and Friday to allow an orderly departure on Oct. 31. But if an agreement is not possible he will lead the United Kingdom out of the club it joined in 1973 without a deal – even though parliament has passed a law saying he cannot do so.

EU politicians such as Irish Foreign Minister Simon Coveney said a deal was possible and that much more work was needed. But EU diplomats were pessimistic about the chances of Johnson’s hybrid customs proposal for the Irish border riddle.

In light of developments it appears markets will be prepared to adopt a wait-and-see approach to Sterling before making any major directional decisions on the currency ahead of the crunch European Council summit starting on Thursday, where it will be known if the two sides have struck a deal.