UK: Issue of the Irish border remains unresolved - BBH

Sterling remains the only major currency that gained against the greenback this week and is holding on to a little more than a 1% gain this week.  

Key Quotes

“It is the fourth consecutive advancing week and the largest move seven weeks.”  

“While the UK's willingness to raise its initial financial offer to the EU for the amputation, the thorny issue of the Irish border is unresolved.  The problem comes down to this:  The UK's decision to leave the EU and the single market requires it to have border controls for people, goods, services, and capital.  The EU and Ireland insist that there is no hard border between Northern Ireland and Ireland.  That is an important basis of the Good Friday Agreement that helped bring peace the Emerald Island.”  

“May's political gambit of snap elections earlier this year resulted in a loss of the Tory's majority.  The government now depends on the Democrat Unionist Party from Northern Ireland.  The DUP insists that the hard border is not within the UK, in a Hong Kong-like arrangement.”

“Hence the problem: the hard border cannot be outside of the UK (between Northern Ireland and the Republic) nor inside the UK (between the UK and Northern Ireland).  The DUP is threatening to leave the government if its demands are violated.  Monday is the EU-imposed deadline for an agreement that would allow the next phase of negotiations to begin. Prime Minister May is to have lunch with Juncker then and was expected to signal a proposed resolution.  The deadline seems soft in the sense that theoretically the real deadline in the middle of the month heads of state summit.”