Will PM Theresa May agree to pay the divorce bill that the EU demands? This is the hope that pushes the pound higher. Accepting paying a fat cheque to the EU will unlock the second stage of the talks, regarding the future relationship.
The EU sequenced the talks early on. They forced the UK to first discuss the terms of the exit before talking about the future. This put the UK in a losing position from the outset.
The sums in question are around 60 billion euros that the EU demands and 20 billion that the UK was initially agreeing to pay. Reports coming out of the UK suggest that May is convincing her cabinet members to agree on a bigger cheque. This was supposed to be agreed in the EU Summit in October and now the new deadline is the upcoming EU Summit in December.
All in all, the EU is treating the UK like Greece and this is not about to change.
Yet the pound likes it: any progress in the negotiations means a lower chance for a “hard Brexit”.
Pound/dollar is currently trading around 1.3265, just under resistance at 1.3280. The next level of resistance is 1.3320, which is the top of the 1.3030 to 1.3320 range. Support awaits at 1.3220.
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Here is how the recent move looks on the pound/dollar hourly chart.