Overnight reports have emerged that in the upcoming days the UK Prime Minister Theresa May will potentially offer a significant concession to the EU, which would potentially break the deadlock in the Brexit negotiations. The plan is for the UK to remain tied to European Custom laws once the transition period is over at the end of 2020. This wouldn’t be indefinitely, but until the UK manage to negotiate a deal in regards to the Irish Border, however its likely that the new plan would be in place at least to the next general election.
The problem for Theresa May, is that by extending an arm for the Europeans it will mean the UK will struggle to negotiate trade deals globally and that is one of the arguments to why the UK are leaving the EU in the first place.
Personally I see this going one of two ways. If the Conservative party and the DUP back the PM’s plan, I believe a deal is close to being struck and therefore I expect the pound will rally short term. However if the PM does not get the backing from her party, I believe a vote of no confidence or a general election is closer than people think. If this was the case it could have a devastating impact on the value of the pound and Australian dollar buyers may have a bitter taste in their mouths for a long time to come.
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