Brexit Trade Deal Hangs in the Balance, Pound Remains Steady
Brexit Trade Deal Hangs in the Balance, Pound Remains Steady
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Key Takeaway
- Fishing remains a bone of contention between the two sides
- Both sides committed to work towards a solution
The Brexit trade talks saga continues on Friday as the negotiators on both sides have very limited time to strike a deal. UK’s chief Brexit negotiator David Frost and his counterpart, the EU’s Michel Barnier, appear to have reached another stalemate on their way towards the final deadline, December 31. The issue of fishing rights remains as the last impediment and a sticking point to be resolved for a deal to happen before time runs out. UK’s David Frost warned earlier that the progress has been “blocked” by the EU on the matter of fishing rights. On the other end, the EU’s chief negotiator Michel Barnier commented Friday morning that the Brexit talks have a “narrow path” to an agreement also urging for prompt action. Mr. Barnier has called for mutual respect of interests, saying the EU respects the UK’s sovereignty and requested the same from the UK regarding the integrity of the bloc.
UK Prime Minister Boris Johnson warned that the trade talks are facing a serious challenge right now and that the EU should reconsider its stance over the fishing rights, otherwise a deal will not be possible. In a conversation on Thursday with European Commission President Ursula von der Leyen, Prime Minister Johnson was unable to make any progress and later commented that “big differences” remain with a focus on fishing waters.
The market is reading this as a sign that the two sides have already cleared the other two main sticking points, level-playing field, and dispute resolutions. The first one deals with guaranteeing fair competition, while the second one is mainly about how the deal will be enforced and what would happen in the future if one of the sides violates the rules.
The Sterling Continues to Trade Sideways
As talks continue in Brussels today, the British pound remains resilient hovering near the recent tops over 1.3500 against the US dollar. On Friday, the GBPUSD pair has given some of the gains made this week, while traders and investors remain positive towards the outcome of the Brexit developments. The Sterling has been trading sideways for the last couple of days as market participants are patiently waiting on new developments on the negotiation process with the possible scenario to transfer the talks into the weekend, similar to last week’s agenda. Both the UK and the EU this week indicated multiple times that a deal is the desired outcome and they will continue working over the clock to finalize it.
Friday brings more uncertainty to the current situation. Following the late conversation on Thursday, Commission President Ursula von der Leyen took to Twitter to comment on the Brexit progress by saying that “substantial progress on many issues” has been made, but the difference on fisheries will be “very challenging” to bridge. On the topic that has the potential to derail the agreement, Prime Minister Boris Johnson urged the EU to make “big changes” on its stance on fishing. Mr. Johnson also noted that the progress can be thwarted unless the EU position is “changed substantially”, as the bloc’s position is “simply not reasonable”.