Sterling falls as investors re-evaluate no-deal risk
Boris Johnson travelled to Brussels last night in the hope to bridge the gap on a post Brexit trade deal. A final deadline has now been set for Sunday. As a result, sterling fell 0.5% this morning, and continues to fall, with GBP/EUR trading @ 1.10 and GBP/USD trading @ 1.33. The ‘lively’ dinner, as described by Ursula von der Leyen, highlighted that both sides were still ‘far apart’ on some issues. Both sides have agreed that a decision, either way, will be made by Sunday. Both teams now scramble to resolve those remaining issues by the new deadline. It will be interesting to see if both parties stick to the deadline this time. Every previous deadline has led to an extension, but with only 3 weeks left to go, time is running out. At this point, the words deadline and extension are almost synonymous, so markets will be weary of what has happened previously as we move into the weekend.
There have also been reports suggesting a divide between the EU’s top team. Michel Barnier commented that chances a deal are now ‘very slim’. A source close to Barnier said that he was cornered that ‘Ursula Von der Leyen could relax the level playing field demands to clinch a deal’. He was further reported to have fears that she would make too many concessions as we approach the deadline. However, It’s not just Barmier that is concerned. Another EU Diplomat was quoted saying ‘ She’s not the negotiator, Barnier is. She might act like she is but Barnier has been negotiating and knows the technical details’. While Von der Leyen remains hopeful, Barnier is not, which should worry most.
The UK also continues it works for post Brexit trade deals outside the EU. This morning, the UK signed a deal with Singapore worth more than $22Bn in trade. The deal largely mirrors the agreement already in place between Singapore and the EU. And finally, UK GDP was released this morning that showed the economy grew by 0.4% down from the previous reading of 1.1%.
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