Pound wobbles as deadline to strike key Brexit issues looms

LaToya Harding
·Contributor
·3 min read
EU chief negotiator Michel Barnier wearing a mask because of the novel coronavirus pandemic walks to a conference centre to continue negotiations on a trade deal between the EU and the UK in London on November 9, 2020. - The European Union and Britain said major divergences remain but that post-Brexit negotiations would continue this week to clinch a trade deal in the scant time left. (Photo by Tolga Akmen / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)
Talks resumed in London on Monday as EU chief negotiator Michel Barnier and his UK counterpart David Frost seek to bridge these differences. Photo: Tolga Akmen / AFP

The pound (GBPUSD=X) was treading water on Monday, erasing its early rise of around 0.3%, as the deadline for the UK and the EU to strike a deal on key Brexit issues draws closer.

Sterling slipped slightly against the dollar and the euro after a number of Brexit developments took place over the weekend.

On Saturday Boris Johnson told European Commission president Ursula von der Leyen that “significant differences” remained in the UK-EU negotiations.

The two sides have continued to disagree over fishing rights and a level playing field agreement, which is aimed at preventing unfair competition in areas including state subsidies.

They agreed during a phone call to “redouble efforts” to reach a Brexit trade deal. The pair also agreed to be in “personal contact” about the discussions.

Later on Sunday the prime minister then signalled progress in Brexit talks, saying a deal with the EU was “there to be done.”

Watch: What happens if no Brexit trade deal is struck?

He said: “I’ve always been a great enthusiast for a trade deal with our European friends and partners.

“I think it’s there to be done, the broad outlines are pretty clear. We just need to get on and do it if we can. And I said that to Ursula Von der Leyen…and she totally agrees with me.”

Talks resumed in London on Monday as EU chief negotiator Michel Barnier and his UK counterpart David Frost seek to bridge these differences.

The clock is ticking to agree a deal before next week, and the end of the post-Brexit transition period on 31 December. If no agreement is made, trade will default to World Trade Organisation (WTO) rules.

Some firms are hoping that the time pressure, alongside the COVID-19 factor, will focus efforts to try to avoid disruption when the deadline comes at the end of the year.

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UK and EU negotiations have intensified in the last few months.

In October, French president Emmanuel Macron was said to be laying the brickwork for a delicate compromise on fisheries, to help the UK and EU agree a deal.

Macron, who has publicly taken a hard stance on the issue, told French fishermen to brace for a smaller catch after Brexit.

Exchange strategists at Goldman Sachs (GS) said that sterling remains a buy against the euro, remaining optimistic that a deal will be struck.

However, in a note to clients, the Wall Street bank said that it did have concern that the mid-November deadline was fast approaching and talks could extend into December as a result.

Zach Pandl, an economist with Goldman Sachs in New York, said: “The Brexit process has been in a quieter, more technical phase, and that is good news for the prospects of an eventual deal. Staff have reportedly begun the process of working on text for sections of the deal where there is already agreement, which is generally a good sign of progress in trade negotiations”

“Leaders reported that they made some progress on the call over the weekend, but ongoing political intervention will likely be required to close the final outstanding issues,” he said.

Watch: 'A competent government could get a Brexit deal', says Lord Falconer