Brexit into the eleventh hour
The eleventh hour is seemingly finally upon us, with Brexit talks hitting a critical stage and the next few days being make or break. There’s a lot more leaks coming from the talks now and it would appear frustration as well, with the same old issues remaining the problem – level playing field, fishing and governance.
I remain confident that a deal will be reached and that is quite clearly shared in the markets, with the pound hitting one-year highs against the dollar on Thursday, within a whisker of 1.35. It also made some ground against the euro but remains around the middle of the range it traded in over the last few years.
Clearly, traders are not particularly concerned about no deal, despite nerves appearing to creep in earlier this week. There’s a lot of talk about a deal potentially being done in the next few days, which means additional weekend risk for the currency, should a deal finally be announced or talks hit an impasse and break down. EU leaders are hoping to review the deal next week at their summit so time really is fast running out, with the December 31st deadline just weeks away.
There’s so much hanging on that summit next week, with the EU also hoping to overcome differences over its 2021-27 budget, which includes the EUR750 billion recovery fund. Hungary and Poland have vowed to veto it as long as it contains rule of law clauses. But with the rest apparently willing to push ahead with an emergency budget and find an alternative mechanism for the recovery fund including the other 25 member states, their hand suddenly looks much weaker. The fact that they’re such massive beneficiaries of EU funding doesn’t help either. There is little doubt that next week’s summit will be a key event on the economic calendar.
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