The Pound surged yesterday on news Brexit negotiators Michel Barnier and David Davis have agreed a "large part" of the deal that will lead to the "orderly withdrawal" of the UK from the EU. The markets welcomed the announcement which represents one of the most valuable economic guarantees secured by the UK since Brexit talks began. This 21-month transition period provides business with much stronger assurances that a cliff-edge exit will be avoided next year. The transitional period is set to last from 29 March, 2019 to December 2020 and is intended to smooth the path to a future permanent relationship.
Barnier said there was also an agreement on the rights of 4.5m EU citizens in the UK and the 1.2m UK citizens in the EU after Brexit, including giving EU citizens arriving in the UK during the transition the same rights and guarantees as those who arrive before Brexit.
Issues do still remain however such as the Northern Ireland border. The proposed deal will include an emergency "backstop" option to avoid a hard border that could see Northern Ireland effectively staying in parts of the single market and the customs union. This had previously been ruled out by Theresa May and any deal creating a difference between Northern Ireland and the rest of the UK is opposed by her DUP allies.
The UK will also be able to negotiate and sign trade deals during the transition period. Both the UK and the EU hope the terms of an agreement on the transitional period can be signed off by Mrs May's fellow leaders at the EU summit this week.
09:30 – GBP – Consumer Pricing Index is expected to fall to 2.8%