Optimism is growing for a Brexit deal at the start of the week with EU and Uk officials resuming talks in London.
In recent trade, the British finance minister Rishi Sunak said on Monday, echoing comments by Prime Minister Boris Johnson, that Britain and the European Union have made significant progress in talks about a post-Brexit trade agreement.
The officials are trying to bridge what the two sides have said are still significant differences on fishing quotas and competition issues.
On Sunday, the PM Johnson said that the “outlines” of an agreement were clear and a deal was “there to be done”.
However, he has also insisted the UK is prepared to leave the single market and customs union on 31 December without agreement.
Meanwhile, Sunak told parliament, “as we heard from the prime minister at the weekend, we have made significant progress.”
“Those talks are ongoing. It’s clear that a deal can be done but that will require both sides to continue to act in a constructive way, and we remain ready to do that and are working hard at it.”
Market implications
This is good news for the pound on a day where risk appetite is already up on the coronavirus vaccine news.
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However, the US dollar is picking up a bid which is stalling the progress in the pound which had met highs of 1.3208 in early New York trade.
At the time of writing, GBP/USD is trading at 1.3146 and has not reacted particularly to the Brexit sentiment as of yet.
There is still far too much uncertainty.
Following a phone call with Mr Johnson on Saturday, European Commission President Ursula von der Leyen said “large differences” remained over the question of access to British fishing waters from 2021 and regulations on workers’ rights, environmental protection, and state aid designed to maintain a “level-playing field”.
The EU’s chief Brexit negotiator Michel Barnier and his UK counterpart Lord Frost are in a race against the clock and the time of ticking.
A future economic partnership to come into force when the post-Brexit transition period ends on 31 December is still very tight.
The risks of there not being an agreement at that point remains high and what markets fear is trade between the two defaulting to the World Trade Organization (WTO) rules.
Tariffs are set to be introduced on many imports and exports, which could push up costs for firms and consumers.
Both the EU and UK say they want to avoid this although the EU has said it will not do a deal “at any price”.
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