The possibility of striking a Brexit deal before the weekend has helped to stabilise the pound as it recovered some ground, on Thursday. However, tensions are building ahead of the weekend as talks continue. This means that any Brexit-related headlines will create pound volatility and move the market considerably.

The clock is ticking

While markets are hopeful that a deal will be reached, the fact that the clock is now ticking with little space for manoeuvres means that the pound will remain sensitive. The Telegraph reported that Barnier told EU ambassadors that the UK has become more flexible and lowered its demands in regard to UK waters post-Brexit, demonstrating that the two sides are closer to an agreement. Fisheries and governance remain unresolved, with the latter to be negotiated once all other agreements are settled. Talks could now focus on the percentages involved in fisheries, but France might prove to be uncompromising on its fishing demands. According to The Telegraph, "Fishing nations such as France, Denmark, the Netherlands, Belgium and Spain fear Mr Barnier may cave too easily to British demands as talks enter their endgame. Paris insists the UK red line of annual fishing negotiations is unacceptable.” France has already clarified that it will veto any deal that goes against their interests.

A report in The Times said that "France and other hard-line countries are pushing for no deal in Brexit talks to soften up Britain before a reset in negotiations next year, unless the government makes significant concessions in the coming days," and unless the UK "backs down over the next 48 hours", a period of 'no deal' will "bring a chastened Britain back to the table next year".

The BBC's Europe Editor Katya Adler said that Brussels believe a deal will be possible in the event that the UK makes significant steps to meet the demands regarding fisheries, competition rules and governance.

Talks continue in London

Negotiations are at the final stages, but it appears that any last hurdles will require, maybe not divine intervention, but at least some help from leaders from the UK, EU Commission and France. Both Wednesday and Thursday, saw negotiators working well into the night for the final push.

On Friday, The Telegraph reported that talks will find Boris Johnson and Emmanuel Macron coming head to head this weekend, with France interested in securing access to fish in British waters.

According to certain sources, Macron's officials have been "lobbying hard" among different member states to agree to added demands on fishing, state subsidies and non-regression clauses, and these will be discussed by both the PM and the French president over the weekend.

EU member states could also veto any deal as they continue to have concerns about state aid mechanisms and how to enforce agreed environmental and labour standards. France and Denmark are reluctant to lose their fishing shares in UK waters.

Indeed, there is not much time left now, as negotiations continue and the upcoming EU leaders’ meeting on 10 and 11 December 10-11 means that a final deal needs to be ready to be agreed. Sterling will make significant gains if a deal is announced in the coming weeks and it could potentially continue to rise.

 

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The pound appears to have risen ahead of the weekend, as Brexit negotiations continue. EU ambassadors have been told that a trade and security agreement with Britain is almost ready to be finalised as gaps on the contentious issues are “slowly shrinking.”

Both sides however remain inflexible, with European politicians saying that there remains work to be done and the UK saying that the EU needs to compromise. The risk of a no-deal Brexit in six weeks is still high.

According to a Bloomberg article, the UK “hasn’t moved sufficiently to overcome the main obstacles to a post-Brexit trade deal as three of the bloc’s leaders called for contingency plans to be stepped up in case there is no agreement.” Secretary General of the Commission Ilze Juhansone told envoys from the EU’s 27 member states on Friday that “negotiations could now slip into December as progress has been slow.”

On the other hand, the report noted that "The U.K. government has said that both sides have already made concessions on the three remaining areas of disagreement - access to British fishing waters, the level playing field for business, and how any deal is enforced - but that it’s up to the EU to make the final compromises."

A report on Reuters, stated that EU diplomats reported that “The European Union and Britain remain at odds in last-ditch trade talks over fishing rights, guarantees of fair competition and ways to solve future disputes, even though they are very close to agreement on other issues.” A senior EU diplomat told Reuters that “We are both close and far away. It seems that we are very close to agreement on most issues but differences on the three contentious issues persist.” Officials will continue negotiations online, as on Thursday it was announced that direct talks were suspended after a member of the EU team tested positive for COVID-19.

Negotiations are stuck

Negotiations have not progressed much as both sides remain unyielding on the main points: “Some things on the level playing field have moved, albeit very, very slowly. Fisheries are not really moving anywhere right now.” In terms of state aid, Britain has offered to set up a regulator for corporate subsidies, as the EU requested, but this was rejected as the body needed to be independent from the government and with a clear authority. Another EU official said that “negotiators mostly focused on such elements of corporate fair play as well as divvying up fishing quotas in recent days: ‘Both of these are still very stuck.’”

Pound Rises despite Brexit deadlock

The pound has risen against the Euro, Dollar and other major currencies, as negotiations continue. Markets remain confident that both sides will strike a deal despite the persistence of major differences. In the possibility of a trade agreement being reached the next two to three weeks, the EUR is expected to fall, something that will also be supported by positive news about a vaccine for Covid-19.

Are you Transferring Funds Abroad?

With the ongoing Brexit negotiations and unexpected volatility, contacting a currency specialist could save you time and money. If you are sending your family members money, get in touch with Universal Partners FX to find out how much you can save in your international money transfers. Universal Partners FX can provide invaluable help on efficient risk management and tailored solutions to your personal transfer needs.