At a summit of EU member states on Thursday April 11, 2019, EU leaders found a compromise and agreed to postpone the departure of the United Kingdom. EU leaders and the UK government agreed on a so-called flexible extension of Brexit, but no later than October 31, 2019. Initially the foreign exchange market reacted to this news by strengthening the British pound (GBP) against the US dollar (USD) but subsequently, during the morning (CET) of April 11, 2019, the GBP/USD currency pair traded in an alternating trend with GBP slightly outpacing USD.
On April 11, 2019, at 9:52 CET, the GBP/USD currency pair traded on the Forex market at a mutual exchange rate of USD 1.3088 per GBP with a GBP weakening by – 0.01%. Later on during the European trading morning on April 11, 2019, this currency pair showed a trend of strengthening of GBP by + 0.05%. In relation to the GBP, the Euro (EUR) maintained its prevailing exchange rate dominance, and during the morning of April 11, 2019, at 9:59 CET the EUR/GBP currency pair traded at GBP 0.8611 per EUR with a daily increase of EUR + 0.02% against the GBP.
This postponement agreement gives the UK and its government another six months to find the political will and compromise to approve their own Brexit agreement with the EU. At the same time, if the UK does not do so by 22 May 2019, it is obliged to hold European Parliament (EP) elections. If the UK government does not hold these elections, its departure from the EU would be on June 1, 2019, even without an agreement in the form of a hard Brexit. In all EU Member States the EP elections will be take place from 23 to 26 May 2019.
According to economic rapporteurs, the agreement to postpone the UK’s departure from the EU is one of the best negotiated compromises in the whole Brexit process. Key European leaders such as French President Emanuel Macron and German Chancellor Angela Merkel consider this decision the lesser of two evils in this matter. Economists and financial analysts are more optimistic about the matter, stating that this postponement could mean Brexit breakthrough meaning the UK’s political team can eventually review the entire Brexit and withdraw its request to activate Article 50 of the Lisbon Treaty. Consequently, there would be considerable scope for negotiating new conditions for the UK to remain in the EU.
This situation, although now only a theoretical possibility for the UK to remain in the EU, encourages a number of investors and traders and creates positive investor sentiment. Thanks to this investment mood, the EUR strengthened against the USD. The EUR had started strengthening already at the beginning of this summit during the Wednesday afternoon and evening on 10 April 2019, but even during Thursday’s European trading morning on April 11, 2019, the EUR maintained a moderate but nevertheless prevalent trade trend. Currently during April 11, 2019, at 10:21 CET, the EUR/USD currency pair traded on the Forex market at a mutual exchange rate of USD 1.1275 per EUR, with a daily EUR + 0.02 increase against the USD.