Brexit Talks "Could Reach a Denouement this Weekend, Stay Tuned", Pound Sterling Advances on Dollar and Euro
- GBP on front-foot amidst hopes for a Brexit deal
- UK govt. says Parliament to be recalled in event of a deal
- "Denouement" possible this weekend - RTE's Connelly
- BBC's Adler says EU facing internal squabbles over fish
Picture by Andrew Parsons / No 10 Downing Street
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The British Pound advanced to two-year highs against the U.S. Dollar on Thursday while gaining on the Euro and other major currencies amidst suggestions a potential breakthrough on Brexit negotiations could happen this weekend.
EU Chief Negotiator on Thursday briefed the EU Parliament's Conference of Presidents on Thursday and said good progress was being made in talks.
However, the familiar caveat was issued that some stumbling blocks remain.
"Further optimism on the chances that the UK and the EU would agree a trade deal meant that Sterling was among the strongest-performing G10 currency for the 3rd day running, as it climbed +0.36% against the dollar to a 2-year high of $1.35," says Jim Reid, an economist at Deutsche Bank.
The Pound-to-Euro exchange rate is presently quoted at 1.1125 and the Pound-to-Dollar exchange rate at 1.3614.
While optimism for a breakthrough are high, hopes that it would come before Friday were quashed late on Wednesday when the UK government announced the House of Commons would close for the Christmas period and MPs would only return should a Brexit deal be agreed with the EU.
This signalled an accord was still some days off.
The Pound had risen sharply on Tuesday and Wednesday on talk that it would soon be announced that Parliament would sit through Monday and Tuesday next week, with markets interpreting this as a sign a deal would soon be announced and MPs would be required to vote it through.
But it seems that the progress of recent days has not been rapid enough to allow for a decision on extending the Parliamentary timetable to be made this week.
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Concerning the state of talks, those journalists with sources inside the talks remain a critical source of information.
Tony Connelly, RTE Europe Editor, is one such source we have been following who a strong record of delivering reliable inside information.
According to Connelly a great deal of energy has been expended on agreeing level playing field provisions (LPF), but with this sticking point more or less agreed the focus can turn to fisheries.
"The question of a review clause (or sunset clause) which is primarily about the fishing arrangements is still in there, and it will still embrace the wider Free Trade Agreement," says Connelly. "That's why in recent days Michel Barnier has been linking "access to waters" with "access to markets". In other words, if we have a fisheries review in 5 yrs time to take stock of quota share + access, the EU can also assess whether the level playing field has remained level."
But it is said negotiators are struggling to formulate a legal mechanism linking fisheries and a general review of the FTA.
"It's not clear that the UK is fully on board with the idea at all," adds Connelly.
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The BBC's Europe Editor Katya Adler says EU sources have told her the UK has accepted the idea of 'managed divergence' in exchange for preferential access to single market. i.e. if UK divergences from EU standards then the EU has right to retaliate.
She reports the right to retaliate would cut both ways, for example if the UK views EU businesses as having unfair advantage after Brussels changed standards.
But the two sides are reportedly yet to agree on what mechanism to judge whether unfair advantage exists or not, given the EU has climbed down and accepted it can’t take unilateral action.
Numerous media sources are reporting on Thursday that the focus now turns to fisheries where there is a notable impasse.
"Britain and the EU are close to agreeing a Brexit deal but a battle over fishing access could derail the agreement in the coming days, the European Commission president has warned," reports The Times on Thursday.
On fisheries, both sides are stuck at their opening positions, according to Connelly, which he says sees the EU offering up to 18% of the €650MN worth of shared stocks caught in UK waters.
The UK is said to be seeking 80%.
"If they get LPF over the line then fish will be a classic numbers negotiation," says Connelly, who cautions that UK sources are warning the EU not to underestimate the strength of feeling about fish.
In essence, fish is more tangible concept to UK voters than the technical nature of LPF negotiations.
According to Adler a further complicating matter on the issue of fisheries is an internal squabble amongst EU states, as they will have to agree amongst themselves how to split a smaller quota.
"France has famously been outspokenly tough on fish. Wants to protect French fishing rights in Channel. If it gets anything near what it wants, I’m told by EU insider, then EU wld have to compensate by giving up rights in other waters eg around Cornwall, also north of Scotland," says Adler.
Apparently, Spain is very concerned, as are the Danish and Dutch.
"They ask why they should lose fishing jobs to placate Macron, these are just the complications intra-EU, never mind finding final fishing agreement with UK," says Adler.
She reports of speculation that Barnier will have to ultimately call the bluff of EU coastal nations, arguing that if you don’t compromise on fish, we’ll have no deal at all - at far greater cost.
"This is for the coming hours/days, Im told," says Adler.
"All told, things could reach a denouement this weekend. Stay tuned," says Connelly.