European session review: GBP strengthens, supported by upbeat comments on UK-EU trade deal by the block’s chief Brexit negotiator Barnier

GBP strengthened against its major rivals in the European session on Wednesday, supported by upbeat comments on the UK-EU trade deal by the block’s chief Brexit negotiator Michel Barnier.

While speaking to the European Parliament this morning, Barnier said that a trade deal with the UK “is within reach if both sides are willing to work constructively, if both sides are willing to compromise, and if we’re able to make progress in the next few days, on the basis of legal texts, and if we’re ready in the next few days to resolve the sticking points, the trickiest subjects”  He also pointed out that over the past few weeks progress had been made with on law enforcement cooperation, including protecting human rights, Europol, Eurojust, data protection and other areas and that “an outline is emerging for this deal on these points.” 

“Our door remains open - it will remain open right up until the last day where we can work together. We’re willing to do intense work, to intensify talks day and night if that’s what needed to reach a draft agreement that will leave enough time for democracy”, he concluded. 

In response to Barnier’s speech, the UK’s government said that they noted “with interest” his significant comments on the issues behind the current difficulties in talks and they are studying carefully what was said. They also promised that the UK’s chief negotiator David Frost will discuss the situation when he speaks to Michel Barnier later today.

Apart from Brexit-related headlines, investors also continued monitoring the coronavirus-related news as the UK is struggling to fight Covid-19 resurgence. UK prime minister Boris Johnson stated today that the government is pursuing a local and regional approach to restrictions, adding that he does think that national lockdown is not the right policy.

Market participants also received the UK’s inflation data for September. The Office for National Statistics (ONS) reported the UK’s consumer price inflation accelerated to 0.5 percent y-o-y last month from a near five-year low of 0.2 percent y-o-y in August. That was in line with economists’ forecast. Nonetheless, inflation remained well below the BoE's 2-percent target.