Firms pound sterling against euro and dollar as executives appear poised to step up post-Brexit trade talks


– Johnson and von der Leyen to discuss ‘next steps’ this weekend
– Reports suggest progress towards ongoing deal
– But now probably only treat in November or December.

Above: Michel Barnier briefs the media on the state of EU-UK trade negotiations. Photographer: Claudio Centonze. © European Union, 2020. Source: CE – Audiovisual Service

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The British pound rebounded on Friday amid new evidence that Brussels and London are pushing for a Brexit trade deal, but the currency is expected to remain very volatile heading into the weekend as investors wait for new headlines on the state of trade negotiations on Brexit.

The last official round of negotiations ended today without a breakthrough, but it was confirmed by the office of European Commission President Ursula von der Leyen on Friday morning that an appeal will be organized between von der Leyen and British Prime Minister Boris Johnson on Saturday, where “stocktaking of negotiations and discussion of next steps” will be on the agenda.

The fact that the “next steps” are ahead is a particularly encouraging message and points to further progress and this may well explain why the pound sterling is outperforming its peers on Friday.

“The pound sterling rose ahead of scheduled Brexit negotiations this weekend between British Prime Minister Boris Johnson and the President of the European Commission in an attempt to forge an elusive trade deal. The pound sterling continues to fluctuate as a barometer of confidence towards an amicable trade deal, ”says Joe Manimbo, senior market analyst at Western union.

Nick Gutteridge, independent Brussels reporter for The sun and other national headlines that have a solid reputation for covering Brexit talks, say the news from von der Leyen’s office is “a promising sign”.

“Elaborating the EU’s position was pointless having another high-level meeting unless there was an opening to explore. As leaders, Johnson and VDL are not going to go into details. Their task is to find a political compromise. negotiators can make it happen, ”Gutteridge says.

Commenting before the call, von der Leyen confirmed the EU’s intention to continue working for a deal:

“We should be working on a mechanism where over time when things change there is alignment and if there are issues and difficulties there has to be a dispute resolution mechanism. There is still a lot of work to be done. It is a question of fairness.

“So it’s so difficult, but overall where there is a will, there is a way. I think we should intensify the negotiations because it is worth the hard work. We are running out of time, 100 days before the end of the year, so it is worth intervening now. ”

The EU’s chief negotiator, Michel Barnier, has meanwhile chosen to forgo holding a press conference after the talks, which is unusual. However, that in itself could indicate that progress has been made in the talks and that an agreement needs to be reached.

This is based on the view that negotiators were generally quite loud and tended to wave to cameras when they felt that progress had not been made. Silence, in this case, speaks volumes.

“In the Brexit negotiations over the past four years, the sound of silence has always been the sound of agreements reached. you know we are close ”, says the Financial Times ‘ Public Policy Writer Peter Foster.

Above: GBP / EUR volatility displayed

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In the absence of official guidance on the state of negotiations, markets will remain on the lookout for newswires for unofficial briefings and the pound is therefore expected to remain volatile.

We’ve seen the impact these briefings can have on Sterling over the past ten days as reporters cite officials who do not want to be named. This was especially the case on Thursday when the pound fell, recovered and came back down during these briefings.

The pound-to-euro exchange rate ended the day lower by half a percent, but is seen higher at 1.10 ahead of the weekend, while the pound-to-dollar exchange rate fell by a third of a percent before climbing to 1.290 at the time. Of writing.

“The pound is in the throes of fierce price swings on securities, which we knew would be the case,” says Neil Wilson, chief analyst at “No one wants to try 1.30 unless there are no more concrete rumors from ‘sources’. Talks end tomorrow – more headlines to come. ”

The question for the markets is whether enough progress has been made for the two sides to begin focused talks allowing them to debate the final details of a deal to present to leaders. This “tunnel” or “submarine” phase is in itself a strong indication that an agreement is likely.

On Thursday, it was reported that UK officials said their chances of reaching a deal were 70%, a notable improvement from the 30% chance they had before September.

“There appear to be tentative signs of ‘progress’ despite all the haze around the Internal Market Bill, which increasingly looks like a side event to the main event in trade negotiations,” said Wilson.

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The FT reported that Barnier would have to set a “high bar” before agreeing to start intensified “underwater” talks; However, the newspaper says some EU officials have said they do not expect such submarine / tunnel talks to start as early as next week.

Other reports suggest that the “submarine” phase will likely not begin until after the mid-month meeting of EU leaders at the European Council. This would mean that a flexible deadline touted by both the EU and the UK will have been missed, and introduces the prospect of negotiations extending until November or even December.

What does this mean for the outlook for the pound sterling?

Signs that the process has entered the “underwater” phase would be a notable positive as it sends a strong signal that agreement is likely. However, expecting a deal this month seems increasingly unlikely and as a result the pound could be in weeks of uncertainty which could lead to further losses or consolidation.

A totally negative scenario would be a bad-tempered presentation from both sides at some point today, indicating that they remain too far apart to enter Endgame talks.

The pound would probably fall in particular in such a scenario.

“Brexit remains at the center of concerns and the GBP has weakened on suggestions that the last round of negotiations has hit a snag. We had anticipated a deterioration in the tone of the week earlier and believe the GBP should continue to lag its peers in the near term. Further on, however, we think the British pound has a lot of bad news in the price and wonder if the downside risks for cable from a No Deal outcome start to diminish, ”says Ned Rumpeltin, EU chief strategy officer. exchange rate at TD Securities.


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