Sterling stays strong

Sterling enjoyed a brief rally yesterday after reports that Britain would tell Brussels it was prepared to stay in the European Union’s customs union beyond a Brexit transitional arrangement.

Cabinet ministers are deadlocked over a future deal with the bloc. The Telegraph newspaper said Britain would tell Brussels it was prepared to stay in the union beyond the end of a post-Brexit transition period in 2020.

Prime Minister Theresa May said on Thursday Britain would leave the EU customs union after Brexit, but a source said London was considering applying the bloc’s external tariffs for a period beyond December 2020.

The euro is heading today for further decline versus the dollar, in what would be a first for the currency since 2015, as political uncertainty in Italy continued to worry investors.

Italy owes the ECB 250 billion. Italy accounts for 15.4 percent of Eurozone GDP and the parties’ hostility toward the European Union stance is the biggest challenge to the bloc since Britain voted to leave two years ago.

Still, some investors have played down the broader impact on the euro and questioned whether the Italian parties will really follow through on such plans.
A quiet day ahead for the markets on the economic data front.

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