The pound rose as M Barnier emphasised that reaching a deal was “still possible”, although three diplomatic sources have noted that in order for an agreement to be secured by the start of Thursday’s EU summit the agreement must be turned into “legal text”. Speaking to Reuters, an anonymous EU official conveyed a sense of urgency: “We need to land this tonight. The talks are ongoing we need to give them space to proceed. Detailed conversations are underway and a deal is still very possible.”
Earlier this morning, leader of the House of Commons, Jacob Rees-Mogg said that if the Prime Minister can get a Brexit deal with the EU, the government will have the votes to pass it through the House.
Speaking to LBC, he noted: “If a deal is agreed with the European Union, it will get through, in my view, the House of Commons because everybody’s desperate to finish this.”
Meanwhile, recent data revealed a declining market perception of the German economy.
The ZEW monthly index for October showed sentiment among German investors fell from -22.5 to -22.8, leaving the euro under pressure against a stronger Sterling.
Commenting on Tuesday’s data, ZEW President Achim Wamback said: “The recent settlement in the trade dispute between the USA and China does not seem to diminish economic scepticism at this stage.”
The disappointing data follows Monday’s statement from the German economy ministry which suggests that, while the economy is unlikely to slide into a prolonged recession, the bloc’s powerhouse economy is trapped in stagnation and weighing on the single currency.
Looking ahead, the pairing is likely to extend its gains if legal text for a Brexit deal is produced before the EU summit on Thursday.
If the pound enjoys a fresh wave of Brexit optimism the pairing could continue to rise, especially if disappointing Eurozone inflation on Wednesday drags on the euro.