Brexit Rears Its Ugly Head Once More
If it is true that there must be a silver lining in all time of hardship, perhaps the only upside to the ongoing COVID-19 crisis is that at least media coverage has a new topic to bombard us all with and we haven’t had to hear about Brexit for short while. However, following a six-week suspension in trade talks, which was agreed in March to allow UK and EU leaders room to deal with the crisis, trade talks resumed this week.
Trade Talks Resume
It seems a strange world in which governments can be simultaneously fighting for the future of the nation’s citizens while also looking to agree trade parameters, especially at a time when global trade has been all but totally stopped. However, here we are.
If we optimistically assume that COVID will be dealt with over the summer allowing focus to return to normal trading drivers and fundamental issues for Q3, then the Brexit trade talks still pose a great deal of risk for both the UK and EU.
Given the current December 31st deadline, there isn’t a huge amount of time to hash out a deal which many experts were already warning looked unlikely to be achieved even before the COVID crisis took hold. More concerning is the fact that just ahead of the COVID crisis, the UK published its mandate for the talks which included an ultimatum from the PM: unless a robust outline for a deal is agreed by the end of June, the UK will walk away from talks early.
While the PM has been out of action over the last two weeks, meaning that we can’t be certain whether this is still his position, according to his deputy Dominic Raab, the UK intends to stand by its guidance (or threat).
Will PM Extend Transition Phase Deadline?
However, surely in light of the massive economic hit being suffered by the UK as a result of COVID, the PM will not want to risk further economic hardship which would result from the absence of a trade deal at the end of the transition period?
There is growing pressure, on both sides of the water, for the UK PM to extend the negotiating deadline to allow for more time and avoid a cliff edge in terms of trade. With the UK potentially facing a further extension to the current lock-down, beyond May 7th, the risk of an even deeper economic plunge is growing. Traders will now have to wait and see how Johnson decides to deal with this situation and are left a little uninspired after seeing his handling of the current crisis.
EURGBP (Bullish above .8680)
From a technical point of view EURGBP remains supported here having found demand at the recent retest of the yearly pivot ( .8680). While above here, continued upside is likely with the market likely to put further pressure on the structural highs and yearly R1 at .9097.
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