Sterling’s extreme sensitivity to Brexit-related rumours continued on Monday, as reports of a compromise offer to resolve the Northern Ireland border problem triggered a spike in the currency.
The pound broke above 1.31 against the dollar, from just above 1.30 prior to the report, which suggested that Theresa May is planning to offer a compromise on the border that could help move talks forward, with exit day fast approaching. It’s been rumoured that the offer could involve checks between Northern Ireland and the rest of the UK, something I struggle to imagine would generate the necessary support in Parliament, not least from the DUP – the junior coalition partner May’s government is reliant on.
Still, while the solution may attract widespread opposition, it could prove to be a step in the right direction and shows a willingness for further compromise in order to avoid a no deal scenario which could see the pound head south once again. The pound is already paring its initial gains but could get another bump if these reports are confirmed. The next question is how reciprocal the EU will be to the idea, along with the conditions it comes with including the entire of the UK remaining in the customs regime.
