Brexit – Hope Returns as Boris Heads for Brussels
After the doom and gloom from the weekend and continued lack of progress, a glimmer of hope returned to the Brexit table.
British Prime Minister Boris Johnson and EU President Ursula von der Leyen held a call earlier in the week that ended in an agreement for a face-to-face.
Today the British Prime Minister heads to Brussels with the hopes of a Brexit deal riding on today’s visit.
Until now, European and British negotiators have failed to close the gap on the three key issues. These have ultimately been the main areas of contention throughout the year.
The fact that neither side has shown any desire or willingness to yield raised the prospects of a no-deal Brexit on Monday.
We saw the Pound see red for 3 consecutive days, culminating in a current week low of $1.32238 before support kicked in.
The Brexit Hurdles
For Boris Johnson and Ursula von der Leyen, the main areas of focus will be UK fisheries, business competition rules, and how any Brexit deal would be policed.
As far as the Brexiteers are concerned, leaving the EU means prising Britain away from the rules of the European Union. The EU sees this differently, however, particularly with regards to business competition rules and the policing of any deal.
A trade agreement hangs in the balance and, while Britain wants to be free of the EU’s chains, the need for a trade agreement suggests that some strings will need to be attached to any agreement.
Earlier in the summer, there was also the introduction of the Internal Market Bill that caused much clamor on both sides of La Manche.
Even the President-Elect made his feelings known ahead of the Presidential Election.
This week, Johnson has announced a willingness to remove contentious clauses that were seen to jeopardize the Good Friday Agreement.
The move should not only smooth things over ahead of today’s meeting but also with the incoming U.S administration. Assuming Johnson goes ahead with the amendments to the Bill, it would also put a U.K – U.S trade agreement back on the table.
At the time of writing, the Pound was up by 0.20% to $1.33775. While eyeing a 1st daily gain in 4, much will depend on Boris Johnson’s business dinner with the EU President.
For the Pound, a positive outcome to the meeting will be needed to support current levels. While the markets are not expecting a Brexit deal from the dinner, the meeting will need to pave a way forward. This would then allow for negotiators to resume talks in the coming days.
A failure to pave a way forward and tomorrow’s EU Summit could spell the end of talks and leave Britain without a deal.
Such an outcome would certainly sink the Pound and weigh on the European equity markets.
There could be one last chance of a deal, however. EU member states will likely press for compromise at the Summit should today’s meeting fail to bear fruit.
Compromising on UK fisheries may not be enough, however, when considering what else is at stake. The last thing the EU needs is a competitive Britain that looks to jeopardize the EU Single Market…
Whatever happens, expect plenty of volatility, with uncertainty and hope likely to grapple for position.