Compromised compromise caps sterling relief

Last night's razor thin breakthrough just changes the flavour of uncertainty

Notwithstanding relief from last night’s 1-vote parliamentary majority against ‘no deal’, the brittle breakthrough just changes the flavour of uncertainty. Sterling peaked around 30 pips higher after late-night news before returning to it mid-$1.3150s comfort zone.

Hard-Brexit risk has fallen incrementally, but there’s still no alternative. Labour leader Jeremy Corbyn and Prime Minister Theresa May dubbed first-round talks “constructive” but also inconclusive. Whispered assessments were more negative. Labour negotiators complained compromise didn’t extend to red lines. Some suspect talks are a device for scaring Conservative rebels into backing the Brexit deal, or for passing the buck.

Meanwhile, discord and disapproval reign. Pro-Brexit Tories are scathing. A junior minister and a whips office official resigned. The EU seeks a longer Article 50 delay than the PM amid speculation she’ll settle for 9 months. Chancellor Philip Hammond indicated Britain wants to exit any lengthened pause as soon as a parliament agrees a deal.

Sterling’s resumed challenges are clearer vs. euro. Despite more slumping German data, the single currency remained bid for most of Europe’s session. It advanced off 0.8518 lows to 0.8548 before sterling revived. The bottom line of a falling flag suggests sterling leeway down to 85.20p, or 85.13, a consistent resistance since late March. Further euro support is possible at 0.8448. The gently falling 100-hour average implies continued euro pressure. But until ranges collapse, sterling rallies will be sold towards around 85.60p.