GBP/USD: Bulls rallied around 2% on Brexit breakthrough hopes

GBP/USD rallied around 2% on Brexit breakthrough hopes and is currently trading t 1.2434 having travelled from a low of 1.2200 to a high of 1.2469, +1.86%. Irish PM Leo Varadkar says a Brexit deal is possible following a three hour meeting with UK PM Boris Johnson. There have been no specific updates on subject matter from the talks but the UK Minister Gove said that the meeting was cordial & constructive and both sides say ‘good progress' was made. 

"However, its quite some turnround after earlier comments from the EU. A press statement released says their discussions concentrated on the challenges of customs and consent but gave little away as to exactly what concessions had been made regarding Northern Ireland in order to get to this position. Varadkar says the talks were at a ‘very sensitive stage’ but were ‘very positive and promising’," analysts at ANZ Bank explained. 

Following these last-ditch talks between Irish Taoiseach Varadkhar and UK PM Johnson, Varadkhar is now set to meet EU’s chief Brexit negotiator Barnier and other key EU stakeholders on Friday and UK’s Brexit Secretary will also meet with Barnier and his negotiating team and GBP is higher as markets have the sense that they may have rekindled potential for compromise. 
However, as analysts at Westpac point out, "whether there is time to create the foundations for any form of agreement into next week’s (17th-18th) EU Leader’s Summit so that it can be debated at UK Parliament’s special sitting on 19th is still a distant hope."

Brexit: What now? 

The analysts at Westpac explained that three options seem possible for tomorrow:

• Foundations for compromise towards forming a deal may be found.
• Agreement to call an end to negotiations until UK gains a clearer workable mandate (elections).
• Failure to progress and negotiations are ceased. Critical will be whether the cessation is acrimonious or not.

• "The initial option would be a surprise and provide a clearly risk positive stance into next week. However, there would likely still be an enormous amount of discussions needed to clarify details for a potential deal that would need an extension of the current Brexit deadline."
• "The second option would lead to what has recently seemed to be the most likely outcome and that then the Brexit deadline is extended to allow for UK to hold elections. The problem then would be whether a working majority (very slim) or coalition can be found to proceed with new negotiations."
• "If the third option is acrimonious, steps to avert an extensions could result in a market unfriendly disorderly Brexit."

As for trade talks between the US and China, news that Trump will meet Chinese Vice Premier Liu today lifted spirits.  Liu and top US trade negotiators, Steven Mnuchin and Robert Lighthizer met to talk, which is the first time the two sides have met since July. Trump announced he will meet with Vice Premier tomorrow at The White House.

GBP/USD levels