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GBP/USD flat-lines in the 1.3320s awaiting further Brexit news

  • GBP/USD has been flatlining around the 1.3320-1.3330 area in recent trade, amid a lack of fresh Brexit catalysts.
  • The currency closed Monday FX trade with solid gains amid hopes that a Brexit deal might still be possible.

GBP/USD has been flatlining around the 1.3320-1.3330 area in recent trade, amid a lack of fresh catalysts regarding Brexit or otherwise to drive the price action. The currency closed Monday FX trade with gains of around 110 pips or 0.8%, helped by hopes that a Brexit deal might still be possible after the EU and UK decided to continue talks after Sunday’s “deadline”.

The only deadline that matters

Another artificial deadline passed, another failure to pressure either the UK or EU sides into making any meaningful compromises that would be enough to get a deal over the line. UK PM Boris Johnson and EU Commission President von der Leyen’s decision over on Sunday to continue talks and “go the extra mile” serves as a reminder that the only deadline that truly matters in these negotiations is 31 December, the one etched into the law in both the UK and the EU as the end of the UK’s EU withdrawal transition period. After that, the two sides must trade on WTO terms. But with EU officials already thinking about/planning for negotiations to continue into 2021 (EU officials have been urging member states not to pursue mini-deal’s with the UK amid no deal chaos as it would undermine the EU’s negotiating position), even this year-end deadline might not end up mattering.

In terms of Brexit news today, there have been no game-changing updates; the two sides remain divided on the issues of fisheries, level playing field (LPF) and governance, although on the latter there were some reports that the EU might be softening its stance a little on its demand for the right to impose lightening tariffs on the UK should it perceive the UK to have broken its LPF agreement with the EU in any way. Elsewhere, the FT reported that EU diplomats had been privately playing down the idea that the entire future EU/UK trading relationship would be derailed by the issue of fisheries.

Meanwhile, as the clock ticks down and no deal becomes ever-more likely, focus on what both sides are doing to prepare for no-deal will rise; an interesting article from the Telegraph out earlier suggested that the UK government might extend the furlough scheme as a means of support for firms hardest hit by a no-deal Brexit.

 

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