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The Sun has reported in a recently published article that the  EU’s trade chief has controversially declared Boris Johnson will either only get a “bare-bones” trade deal from Brussels next year or none at all. Sabine Weyand told business bosses last week that talks will start as soon as possible if Britain leaves on January 31 as planned.

Key notes from the article:

  • Former Brexit Secretary David Davis dubbed German national Ms Weyand’s remarks “the usual bluster”;
  • Mr Davis added: “What the last six months have taught us is when Brussels are faced with a Prime Minister determined to take Britain out of the EU, they come back to the table and talk;
  • “Ms Weyand can bluster all she likes, but she can explain to her own government how the European Commission’s strategy will harm German car industry exports to the UK.
  • Ms Weyand also attacked Britain for walking away from the EU’s bloc, insisting that Europe needed to stick together to stand up to the might of China, Russia and the US.
  • An EU Commission spokesman last night refused to deny Ms Weyand’s comments.  
  • Remian campaigners leaped on the remarks. Lib Dems foreign affairs spokesman Chuka Ummuna said: “It’s clear the Canada-style free trade agreement that the PM seeks cannot be negotiated within the next the next year.
  • Addressing the CBI yesterday, Mr Johnson again repeated his declaration that there would be “absolutely no reason” why a deal could not be cracked in the 11 months available.
  • The PM can extend the transition period under which the UK must abide by all EU rules for up to two years to December 2022, but has vowed not to.
  • Ms Weyand’s remarks are the third intervention in the election campaign so far by senior EU figures.

FX implications:

We can expect plenty more of these types of opinions, commentary and noise which are bound to affect sentiment for the pound as well as the euro. While the pound may be enjoying a spell of demand due to optimism around a Tory election victory and a subsequent dal with the EU due to tory party support for PM Jonhson’s deal, markets will sooner than later begin to price in the risks of trade negotiations.

“If trade talks do not go well the risks of a no-deal  Brexit  would again rise since a Tory majority with several Brexiteers in the cabinet could be disposed to this outcome. A Tory majority may therefore bring plenty of scope for GBP volatility next year,”

analysts at Rabobank argued.