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Pound Weakens As Brexit Deal Prospects Dim


Pound Weakens As Brexit Deal Prospects Dim

Reports of a conciliatory meeting with Irish Prime Minister Leo Varadkar help Boris Johnson revive hopes that a Brexit deal might actually get done, now that Johnson had seemingly won over Varadkar, whose increasing clout within the EU27 might help win over enough support to clinch a deal.

The pound rallied to its strongest level in three months on the news. But on Monday, with much of the US away from their desks for the federal Columbus Day holiday, murmurs of dissatisfaction from the EU and fears that Johnson’s ‘Queen’s Speech’ agenda might be voted down, becoming the first such loss for a government in 95 years, rattled British markets, driving both the pound and British stocks lower.

At one point, sterling was down nearly 1% against the dollar, erasing a large swath of its gains from Thursday and Friday, its largest two-day rally in ten years.

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Over the weekend, EU Chief Brexit negotiator Michel Barnier, whom Johnson’s government has criticized as being too difficult to work with, told a meeting of envoys on Sunday that the UK’s proposal for breaking the deadlock over the Irish Backstop lacked detail and risked leaving the single market vulnerable to fraud, BBG reports.

Analysts said the market was driven by the waning euphoria surrounding the prospects for a deal.

“After the best two-day rally in 10 years, sterling euphoria as regards the prospects of an imminent deal is wearing off,” said Jeremy Stretch, head of Group-of-10 currency strategy at Canadian Imperial Bank of Commerce. “The prospects of a deal have dimmed from the extremes seen on Friday.”

Another analyst noted that, whatever the outcome, traders should know within a couple of days whether there’s

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