GBP at Risk as EU Sends a Firm Warning to the UK

Attention is back on GBP again, as the meeting timeline between UK and EU officials picks up pace over the coming week.

Over the weekend there has been some strong rhetoric from the EU, who are sending a warning to the UK. EU officials are not happy that Britain has not unveiled its post-Brexit state aid plan. They stated that the absence of a UK plan “goes to the heart of the problem in the negotiations". Further adding; there is “no clarity on the UK’s future domestic regime.”

As per the reports, EU officials have reportedly said that unless the UK put forward an alternative proposal then neither side can “even enter the conversation chamber” where a solution could be agreed upon.

Prime Minister Johnson was speaking on the phone with the Polish PM Mateusz Morawiecki on Saturday and said that Britain would be ready to quit its transitional arrangements with the EU “on Australia terms” if no deal on their future relationship is reached.

Of note; Australia does not have a comprehensive trade agreement with the EU. Much of EU-Australia trade follows default World Trade Organisation rules, through specific agreements are in place for certain goods.

The UK is set to be leaving the transition period at the end of the year. Talks are commencing today - Monday, with negotiators meeting face to face with the EU side in Brussels for the first time since March.

What does this mean for GBP?

Expect volatility to pick up pace this week, with upside likely to be largely capped, rallies at risk of being sold. Should a lack of progress be seen with these meetings, then expect downside pressure to be seen for GBP across the board.



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