HomeBrexit Update – Deal or No Deal

Brexit Update – Deal or No Deal

1 October 2020 By Mircea Vasiu

On September 29th, a new round of Brexit negotiations started – this time in Brussels. The Internal Market Bill that has gone through Parliament has created much frustration in Brussels.  

Viewed by some as a strategic move by Boris Johnson and the UK, the Internal Market Bill changes the rules of the game completely, with only a few months until the December deadline. The problem with the bill is that it goes against things already negotiated and considered agreed upon – not anymore.

The willingness of the UK to break a signed agreement has repercussions on both the present Brexit negotiations as well as on the future negotiations Britain will have with other sovereign states (e.g., new trade deals).

A Deal Is Still Possible

Whenever hearing something about an ongoing negotiation, the key is to read between the headlines. Ongoing deal-making requires secrecy, tactics, and so on. Therefore, the truth lies always somewhere in the middle.

Financial markets are a good benchmark for understanding where the discussion between the two stands. Common sense tells us that Boris Johnson will still be inclined towards a deal – just like the E.U. is. The coronavirus pandemic created a tough spot for both regions to delay Brexit further. For those still wondering, we are in 2020 – four years after the infamous referendum, and the United Kingdom has still not left the European Union. Talking about generations lost, uncertainty, business relocation – all these are costs no one can and wants to measure. Therefore, a deal is more than welcomed by both parties.

The British Pound seems to also point towards a deal brewing – cable hovers around 1.30, GBPCHF around 1.20, and EURGBP around 0.90. Any GBP strength beyond these levels should be attributed to progress in the months ahead.

The 9th round of discussions that started two days ago will conclude tomorrow. The aim, this time, is to leave room for the possibility to seal a trade deal after January 1st. If not, December 31st marks the end of the transition period. Also, it marks the end of the current trade agreements.

One thing is for sure – these are unprecedented negotiations. Therefore, mistakes are being made, then the parties try to correct them, and so on. At this point, no party has an interest in not reaching a deal. But they both have an interest in reaching a fair one.

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