Brexit Talks Take a Turn as UK Ready to Pull Out of Negotiations
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- The Brexit stalemate affects the pair negatively
- Limited progress made on fishing rights
The Great British pound slips on Monday as traders weigh the latest Brexit stalemate. Brexit talks are still far from nearing a compromise on fishing and the level playing field, while it remains to be seen whether the two sides will reach a deal this week.
The pound is trading lower on Monday in the early opening hours of the European session as Brexit nears another stalemate in the crunch time before the end of the transition period. GBPUSD reacted negatively to the lack of concrete developments and official agreements over the weekend on the lingering topics of fisheries and fair trade. The Cable opened the session at 1.3409 and reached a high of 1.3437 before turning to the downside to currently trading below 1.3300 with a low of 1.3224 as the news broke out earlier today that British Prime Minister Boris Johnson is ready to walk away from the negotiations unless the European Union agrees to compromise on its demands. British media reported that PM Boris Johnson will stand firm on the UK’s demands for sovereignty as the UK government now expects the EU to drop its “outrageous” demands.
Divisions Still Characterize Brexit Talks
Brexit talks over the weekend failed to create a bridge to overcome the deep divisions over post-Brexit relations. In the latest efforts by the UK and the EU, consensus over the main issues remains distant. The so-called level playing field, policies, and regulations to govern competition between the EU and the UK has now become even more challenging to attain as Member States such as Italy, the Netherlands, and France stepped into the negotiation process and stated that they would veto any deal that they consider unfavorable to their interests. Although no compromise has been reached on the EU fishing right, and even though chief EU negotiator Michel Barnier denied that a compromise is near, so progress seems to have been made. Britain suggested that EU fishermen could have three years to operate in its waters, while the EU insists on ten years. UK Prime Minister Boris Johnson and European Commission President, Ursula von der Leyen will be speaking today to reassess the progress, while chief EU negotiator Michel Barnier will brief ambassadors of the 27 EU Member States.
After so many crunch points and deadlines in the Brexit negotiation process, up until today, sterling traders have kept their optimism that a trade deal would be reached as the UK currency has been reaching new highs. Most recently on Friday, the pound reached its highest against the US dollar since May 2018 with the exchange rate hitting the mark over 1.3500 peaking at 1.3539. The move to the upside for the GBPUSD pair for the last few months has been fueled by rising expectations for a trade deal and also by the weak US dollar performance across the board.
Today’s announcement that the UK is ready to leave the Brexit negotiation table comes as a surprise to the market, given the sharp drop in the sterling, down by 1.59% to the lowest intraday level against the US dollar. The UK currency is trading sharply to the downside across the board in the initial hours of the European trade.