Brexit Update – Pound Jumps on an Agreement to Extend Talks

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Another Brexit deadline passed on Sunday, with negotiations set to continue. Boris Johnson and Ursula von der Leyen announced that it was “responsible to go the extra mile”.

Negotiations will now resume in Brussels. Britain and the EU have until the end of the year to reach an agreement. If both sides reach an agreement, the EU Parliament and the UK Parliament will then have to ratify any deal.

While the news delivered an early boost for the Pound, Boris Johnson continued to see a no-deal Brexit as the most likely outcome.

The Key Hurdles

The news from the weekend was Pound positive, in spite of Boris Johnson’s continued warning of the likelihood of a no-deal Brexit.

According to reports, both sides made progress on UK fisheries and on business competition. This is the so-called level playing field, with the EU adamant in protecting the single market.

A major hurdle remains, however, assuming that both sides close out an agreement on access to UK fisheries and business competition.

Britain has a hard stance with respect to falling under any EU rules and regulations. This leaves the policing of the Brexit agreement the main area of focus according to reports from the weekend.

From the market’s perspective, the very fact that talks are continuing beyond Sunday’s deadline is positive. The extension to talks suggests a willingness from both sides to avert a disorderly Brexit.

While Britain and the EU would face WTO trade terms, the EU would also lose all access to UK fisheries.

Late last week, the news wires had reported an increased British Navy presence to police British waters in the event of a no-deal outcome.

The Pound

At the time of writing, the Pound was up by 0.83% to $1.33297, reversing some of last week’s 1.61% slide.

After having avoided a slid to sub-$1.30 levels, the focus will remain on Brexit talks. Talks will need to reach a conclusion before the end of the transition period.

The markets will now need the news of progress to support the Pound. We can expect the markets to continue to brush aside the noise, however.

The 31^st December deadline is a hard line in the sand for both sides. The deadline is not one that the two sides can shift with ease.