It’s been a choppy day for GBP. GBPUSD has swung within a near 100 pip range from highs around the 1.3300 mark (its highest levels since early September) and lows close to 1.3200, with the cross buffeted by mixed news on the Brexit front as well as broad USD strengthening.
Here is the latest on the state of EU/UK trade negotiations…
The Good News
The Express reported this morning that the EU has agreed to water down its demands for “cross retaliation” clauses as part of the governance talks. Moreover, the Express noted that British negotiators have now accepted the dispute settlement for goods and services, a decent step in the right direction. However, the issues of fisheries and state aid remain outstanding, although progress is being made, the Express vaguely noted.
Elsewhere, UK PM Johnson has reportedly pushed back a vote in the House of Commons on the controversial Internal Market Bill (reminder; the bill that breaks the withdrawal agreement that the UK signed with the EU in October 2019) until the end of the month at the earliest amid fears that pushing the bill through now could anger the EU and hamper Brexit negotiations. PM Johnson is also said to be worried about how the bill might affect relations with US President-elect Biden, whose team has expressed strongly that the UK cannot threaten peace in Ireland.
The Bad News
The UK and EU have been working towards securing a deal by the 15th of November. However, Reuters today reported that EU and UK negotiators are likely to miss this deadline. Sources added that Brexit has been tentatively put on the agenda for the meeting of EU Ambassadors on November 18th.
Separately, a Politico reported tweeted that an EU source had said “Brexit talks not going well this week”, while a UK source said they did not expect a deal this week.
Pretty much, it looks as though without the pressure of an imminent deadline hanging over negotiations, minds have not been focused furiously enough in order for a deal to be made this week. As things so often go with negotiations, things are frequently left until the last minute (especially when the EU is involved). Thus negotiations are set to continue and we may not see a deal this month.
What this all means for GBP?
Most within the market expect the two sides to eventually agree on a deal and avert a disastrous no deal end to the transition period, other wise GBPUSD would be trading above 1.3200!! (If no deal was expected, it would likely be in the low 1.20s).
But GBPUSD will continue to be choppy as negotiations draw to a conclusion, rallying at signs a deal is coming closer and falling on signs of delay or lack of progress.
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