The EU’s deadline for “sufficient progress” on Brexit negotiations is here. Reaching an agreement on the terms of the divorce is a pre-requisite for unlocking negotiations on future relations between the EU and the UK, according to the sequencing forced by the EU.
Intense and high-level negotiations have been going on during the weekend even though EU deadlines can be fudged forward.
There may be few reasons for hope and many reasons to be worried.
- Divorce bill: We learned that the British government will offer between 45 to 55 billion euros to settle its financial obligations, but that was never confirmed.
- Irish border: The Irish government talked about “progress” over the weekend, adding to the hopes on an Irish deal reported last week. But it is hard to see what kind of an agreement can be reached if the future arrangement is unknown: if the UK is in the customs union, there will be no need for a border. But if it is totally out, a border may need to be erected. In addition, any compromise on the union of the United Kingdom could bring the British government down. May depends on the Northern DUP party.
- Citizens rights: The topic that seemed to be the least problematic may reach the top of the agenda. When dealing with citizens’ rights, who gets the final word? The EU wants the European Court of Justice (ECJ) to be the final arbiter but this is considered a red line for many members of the Conservative party. It will be hard to fudge some “creative ambiguity” on this topic so quickly.
Bloomberg reports about the Tory taboo:
Brexit talks risk being torpedoed by the taboo issue of the European Court of Justice, a senior British official said, as the U.K. downplayed expectations of a breakthrough when Prime Minister Theresa May meets European officials in Brussels on Monday.
As aforementioned, the deadline could be pushed back, but this will not be good news. So, will the pound fall?
GBP/USD is trading on lower ground, mostly due to the strength of the US dollar, related to the tax cuts. The pound is stable against other currencies.
So, if we hear that talks have broken down, there is certainly room on the downside. Support awaits at 1.3380, followed closely by 1.3340.
Further below, we find 1.3270 and 1.3220.
In any case, here is the 1973 Genesis album that headline refers to: