EU/UK Trade Talks Fall From Spotlight
With the COVID-19 crisis raging, the trade negotiations between the EU and the UK have understandably taken a back seat in terms of urgency. With the talks due to have started in February, but so far only seeing the initial statements from both sets of leaders, there are questions now over whether the current timeframe (December 31st) affords enough time for proper trade deliberation, given that leaders in the UK and Europe are currently occupied with an all encompassing fight against COVID-19.
As the situation sprawls into April, there is a growing call for the timeline to be extended, to allow for proper negotiation and to create space for a deal. However, up to now, the UK PM has been steadfast in his insistence that the timeframe cannot be extended and that should a deal not be in ready in time, the UK will exit the EU without trade terms.
Growing Pressure on Johnson To Extend Deadline
In terms of the call for the PM to amend his position, the centre-right European People’s Party (EPP), which brings together 11 of the EU party leaders (including German chancellor Merkel and Irish PM Leo Varadkar, has issued a statement imploring the UK government to extend the transition period beyond December 31st.
Many MEP leaders have been calling on the UK to reconsider its position, fearful that dealing with the current crisis won’t leave enough time to engage in proper negotiation. Christopher Hansen, an MEP from Luxembourg said “Under these extraordinary circumstances, I cannot see how the UK government would choose to expose itself to the double whammy of the coronavirus and the exit from the EU single market, which will inevitably add to the disruption, deal or no deal.
“I can only hope that common sense and substance will prevail over ideology. An extension of the transition period is the only responsible thing to do.”
Risks For GBP
However, despite the growing call for the UK to amend its stance on the transition period deadline, the UK is remaining firm. A UK government spokesperson responded to the statement this week saying “The transition period ends on 31 December 2020, as enshrined in UK law, which the prime minister has made clear he has no intention of changing.”
For now, the issue of trade negotiations is out of the market’s central focus. However, towards the summer when, hopefully, the worst of the COVID-19 crisis is over and countries are coming out of lockdown, the risks of a no deal exit could start to drag GBP lower once again.
EURGBP (Bullish above .8685)
From a technical viewpoint. EURGBP is correcting sharply now. Having tested above the .0497 level two weeks ago, price has now fallen back below the 2017 highs of .9097. The sell-off is currently finding support at a test of VWAP. Below here, the next level to watch will be the yearly pivot at .8685. While above here, price could still turn and continue higher.
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