As the deadline for the UK’s actual exit from Europe rapidly looms, the pressure is increasing for the government to agree on a trade deal. Dismissed initially by the Leave campaign as fear-mongering and fantasy, the prospect of a No-Deal situation is appearing to be a real possibility.
Boris Johnson staked his reputation on delivering Brexit, and he’s done precisely that. However, the next part of his passionate declarations – an easy deal – is starting to slip out of his hands.
However, there was some good news this week as despite going way past the original deadline for an agreement to be made, both sides agreed to further talks. There appears to be a genuine appetite from the EU to make an agreement – but only if the UK is willing to compromise.
With only a couple of weeks left until the end of the year and Christmas break in between, a conclusion will have to be reached one way or the other very soon. The only question is, what impact is the ongoing Brexit talks having on the price of sterling?
Faint Hope
It seemed for a while that a No-Deal was the only possible outcome of the Brexit talks, with some MPs warning that we need to be ready to weather a turbulent time. However, although an initial deadline for reaching an agreement was set, both sides have shown a willingness to keep talking in a bid to reach a deal.
The head of the EU, Ursula von der Leyen, said that they would be “going the extra mile” with the UK Prime Minister to try and find some common ground. Von der Leyen stressed that negotiating teams had been working around the clock to try and resolve the main issues of fair trade regulation and fishing rights.
British PM, Boris Johnson, was less buoyant about the outcome, admitting that the two sides are still “very far apart on some key things”.
Despite the rapidly diminishing timeline, some experts believe that there will still be an agreement – but that it’s likely to come at the very last opportunity. With neither side willing to concede, analysts predict that it will be a “one-minute-to-midnight” pact that’s made out of sheer desperation.
Optimism Boosts the Pound
Although there is still a long way to go before an agreement is made, and there is no definite sign that a No-Deal has been averted, the pound rebounded on the newfound optimism. For those looking for an indication on how to spread bet on currencies, all indications have been that sterling will strengthen.
The comments made by von der Leyen gave fresh hope that the EU is committed to finding a resolution rather than accepting No-Deal as the outcome. It rallied the pound on 14-15th December as it emerged that the UK Parliament would be working during the traditional Christmas recess to push a deal through.
By the midweek session, sterling pushed higher still as markets buzzed with speculation that a deal isn’t far away. With the pound the second-highest G10 performer for the second day in a row, sentiment around sterling is high. However, any gains will be tempered by the fact that no official announcement has been made and there’s still a chance that an agreement could fall apart.
