Has anything changed in the Brexit equation?
- Cable spikes after Merkel says 'practical solutions' needed on Irish border
- Fresh talk of EU concessions on Irish border backstop
One of the major talking points overnight was a potential shift in the EU stance on the backstop. Merkel's "practical solutions" comment gave the pound a jolt with cable jumping higher to 1.2084 before backing off again.
Buyers found support at the 100-hour moving average but also as there was chatter from ITV about European leaders considering offering concessions on the backstop. However, once again, resistance around 1.2075 held firm in cable.
The key question now is, has anything changed in the Brexit equation?
I think it's too early to get too excited about things as Merkel's comments are just about the only reliable source of information at the moment. And what she was referring to was the political declaration, as such essentially nothing has changed.
If "practical solutions" could be found, it already would have been. We've been in this situation since Theresa May negotiated the withdrawal agreement at the end of last year and I doubt there is anything the UK can "sell" to change the minds of European leaders.
That said, there is no doubting potential optimism but at the end of the day, lawmakers will have to be realistic that unless there is some willingness to move their respective red lines, to strike a compromise here is almost impossible.
Johnson will be meeting with Merkel in Berlin later today so that will be something to keep an eye out for. We could see more optimistic chatter arise but I would be more inclined to fade that rhetoric than to buy into it.
