Merkel to the rescue?

Angela Merkel gave a glimmer of hope to Theresa May and her political game of chicken with the report via Reuters that she is willing to 'get creative'. I maintain, ever the optimist I know, that Britain will arrange a deal with the EU.....eventually. So, with Germany showing some willing an important first, albeit small, step has been made. Yesterday EU's Barnier is also said to be 'willing to look at alternatives' (it would be nice if there were any, of course ), and with no Brexit related talks expected during Parliament this week the stage is set for more of Theresa May desperately trying to get a deal done. At present, the problem is still too difficult to crack with no hint of a solution in sight and Ireland's Simon Coveney was out yesterday with the report that he 'see's no viable alternatives to the Irish backstop'. Read about it here and here in the Irish Times.

A delay is not what Theresa May wants, but some kind of extension to Article 50 seems very likely here if the impasse continues. However, I think that most of this optimism has been priced into the GBP now. I was reading Citi's piece from yesterday and I find their case compelling to not want to be chasing the GBP here. The volatility risk with the GBP I have found pretty underwhelming so far, but the risk of a no-deal is still a reality. It is not a reality that I think will happen, but it remains the case that risk is to the downside and I think the upside is limited for now. So, we are in wait and see mode again until February 13 when May updates Parliament. I'm not wanting to but the GBP here, but I will have a look at the 200EMA and how the daily close is for a potentially nibble at a long. At the moment, in Britain, the Alternative Arrangements Working Group are in a 3 day meeting and are looking at exploring other options to take back to the EU. The EU meanwhile are holding their nerve and are denying that any changes will be made to the withdrawal agreement. The game of chicken continues....

Merkel to the rescue?