British Pound Nervous as Johnson Set to Visit Brussels in a Last-Ditch Effort to Strike a Trade Deal

By Adriana Anastasiades Tuesday, December 8, 2020

The British pound (GBP) is trading lower than the US dollar (USD) today as investors stay focused on the latest news concerning the Brexit trade deal. Prime Minister Boris Johnson is now set to travel to Brussels to try and finalize the much-anticipated agreement that will open the door for a smooth exit from the European Union (EU) on January 1.

Johnson to Meet With von der Leyen Soon

Boris Johnson is expected to meet with the President of the European Commission Ursula von der Leyen in Brussels this week in a final effort to strike a trade deal before Brexit comes into effect, The Guardian reports.

The two officials haven’t managed to come to an agreement during a 90-minute phone call and decided to continue negotiations in person. Johnson and der Leyen said the conditions for an agreement were "not there."

Areas where the two couldn’t overcome differences included fishing, business competition rules, and management of any deal.

“Talks are in the same position now as they were on Friday,” a UK government source said. “We have made no tangible progress. It’s clear this must now continue politically. Whilst we do not consider this process to be closed, things are looking very tricky and there’s every chance we are not going to get there.”

Johnson and der Leyen are reportedly most likely to meet on Wednesday or Friday.

The UK Labour Party reacted positively to Johnson’s decision to meet with der Leyen. However, shadow minister for the Cabinet Office Rachel Reeves said Johnson should have been more involved in these talks “months ago rather than leaving it to the 11th hour."

Moreover, chief negotiators Michel Barnier and Lord Frost are expected to meet in person on Tuesday to try and bridge differences after failing to make significant progress in negotiations over the past week.

"Talks are in the same position now as they were on Friday. We have made no tangible progress. It's clear this must now continue politically," a senior British government source told BBC.

The source also said that the UK government didn’t intend to close the process, but "things are looking very tricky and there's every chance we are not going to get there."

If the two sides fail to come to an agreement by December 31, the United Kingdom and EU could impose charges on each other’s goods.

Pound Falls as Risk Sentiment Deteriorates, Data Improving

The uncertainty surrounding the outcome of these negotiations has sent the British pound tumbling sharply on Tuesday. The sterling dropped to trade below $1.33 against the dollar. FTSE 100, the UK benchmark index, is trading moderately higher today after losing 0.47% yesterday.

Following the news that Johnson will meet von der Leyen in Brussels this week resulted in increased concerns among investors, causing the pound to drop by more than two cents against USD on Monday.

“Sterling has demonstrated that there has been a shift in confidence surrounding a Brexit trade deal in the past few days,” said head Forex strategist at Rabobank, Jane Foley.

The volatility in the pound’s price reached its highest mark in eight months, suggesting that investors were preparing for a volatile trading session in the coming days.

“The fact that Johnson will travel to meet von der Leyen later this week means that all is not lost with respect to a deal. However, given that the issues of fisheries and level playing field have been in the spotlight for so long, it may be a bit of a long shot to expect that they can suddenly find a new angle to compromise on,” Foley added.

Summary

The UK Prime Minister Boris Johnson is set to meet with European Commission president Ursula von der Leyen in Brussels this week to attempt and strike a trade deal before Brexit takes effect on January 1.

The uncertainty about the outcome of Brexit trade negotiations sent the British sterling tumbling on Tuesday as investors are worried that Britain’s exit from the EU may get messy.

About the Author


Headshot for author Adriana Anastasiades

Adriana is a Journalist with a passion for reporting on business leadership, with a diverse interest in multiple industries.

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