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Brexit Talks Deadline Extended to Sunday, ECB Meets Today

Competition remains a contentious point in Brexit talks, while veto front has limited progress.

SageFX - Dec, 10, 20

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Principal Points

  • Competition remains a contentious point in Brexit talks
  • Limited progress on the veto front

A new deadline has been set for the Brexit talks. The meeting between the UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen failed to yield concrete results on Wednesday. The two leaders met in Brussels late in the evening to resume the negotiations in person. The three-hour talks over dinner ended in deadlock. And the two leaders were unable to overcome the main hurdles.

With three weeks left until the UK leaves the bloc, the questions on how to agree with the EU over a “level playing field”, rights over fishing waters, and governance persist. Because these are the three crucial sticking points standing in the way of a Brexit deal. German Chancellor Angela Merkel commented on Wednesday that the EU is open to the possibility of a no-deal Brexit if an agreement on fair competition is not reached with the UK.

Following the meeting between the UK Prime Minister and the EC President, UK officials stated that differences are still there. As a result, the two sides have agreed to extend the Brexit trade negotiations to Sunday. President von der Leyen expressed her position after the meeting by saying that the two leaders had “a vigorous and fascinating dialogue”, while at the same time they “continue to be far aside”. While a British official indicated that the three-hour conversation had been ‘frank’. “It looks like we’ve now hit the home stretch with brakes and steering wheel locked” an EU diplomat commented earlier. Prime Minister Boris Johnson returned to London late on Wednesday evening. Ms von der Leyen is expected to brief EU leaders on the Brexit progress later today as part of the two-day summit assembly in Brussels.

Internal Pressures Persist for the EU

For all that’s going on in the foreign affairs of the EU, the bloc has its internal pressures to deal with. European Central Bank President Christine Lagarde has signaled that the ECB is ready to boost the eurozone economy. Market expectations are forecasting an additional €500bn to be added to the Pandemic Emergency Purchase Programme. Consensus over a rate cut points to a no.

Meanwhile, the EU Member States are eager to reach a compromise on the stand-off over the €1.8tn budget and the Coronavirus Recovery Package. Both are currently blocked by Hungary’s and Poland’s vetoes. Some progress, however, has been made as Polish officials indicated that they could approve the fiscal stimulus. A possible compromise was discussed on Wednesday by EU ambassadors. Jaroslaw Gowin, Poland’s Deputy Prime Minister, spoke on Wednesday that a compromise is feasible between the German EU Presidency on the one side, and Poland and Hungary on the other.

How do current developments affect the markets? The European trading session is modestly flashing green. With the UK’s FTSE100 up about 0.40%, followed by the French CAC40, higher by 0.35%. The German DAX is relatively unchanged, trading flat at 0.04%.

The EUR/USD has consolidated in the region of 1.2080 on Thursday. And market participants expect the latest ECB policy meeting later today along with updates from the EU leaders summit today and tomorrow. The GBP/USD seems unsteady as the pound has dropped below 1.3300 against the dollar with an opening price of 1.3409 on Thursday.

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