The European Parliament said in its statement: “Safeguarding peace and stability on the island of Ireland, protection of citizens and EU’s legal order has to be the main focus of any deal. The UK proposals do not match even remotely what was agreed as a sufficient compromise in the backstop.”
The British government must now comply with new legislation requiring they seek an extension to Article 50, effectively blocking a Halloween no-deal outcome.
The news fed into market sentiment, buoying Sterling as investor confidence in a Brexit breakthrough increased.
In UK economic news, today’s UK Markit Services PMI for September contracted unexpectedly from 50.6 to 49.5.
Chris Williamson, the Chief Business Economist at IHS Markit, remarked on the data: “A trio of grim reports on the economy means that the vast service sector has now joined manufacturing and construction in decline… suggesting a greater likelihood that the [Bank of England’s] next move in interest rates will be a cut.”
Meanwhile, the euro fell against the pound following today’s negative Eurozone economic data, with the German Markit PMI Composite for September sinking further into contraction territory from 49.1 to 48.5.
Consequently, the risk of a German recession is significantly increased, adding to pressure on the European Central Bank (ECB) to enact further stimulus measures in the coming months.
The French, Spanish and Italian economies are also showing signs of stalling, with Spanish growth sinking to its joint-lowest level in nearly six years.
Brexit will continue to drive the GBP/EUR exchange rate this week, with any signs that an extension to Article 50 proving Pound-positive.