Trade Talks In Crisis Already?
The British Pound is heading back down towards 2020 lows today in response to the latest headlines around UK-EU trade negotiations. Official talks are due to begin on Monday though expectations are low in light of the current communications between the two sides.
Both the UK and the EU set out their initial visions for a trade deal, highlighting demands and priorities. While both sides have said that they wish to agree a trade deal, there is currently a great deal of difference between the two visions and tensions are high.
In a document published today, outlining the UK’s guidelines for the trade talks, the PM has said that he is prepared to walk away from trade talks as early as June unless there is a “broad outline” of a deal in place by that point.
Addressing MPs this week, Michael Gove reassured parliament that the government wants to strike a "comprehensive free trade agreement" though warned that the UK “will not trade away our sovereignty."
As part of its demand, the EU has requested that the UK maintain EU rules on state aid, workers rights and other issues as well as reporting to the EU on its progress in the fight against climate change.
However, the UK government continues to assert that it will not limit its sovereignty by agreeing to maintain any EU regulations or rules. The UK document published today noted that the UK “will not negotiate any arrangements in which the UK does not have control of its own laws and political life”.
Johnson Gives New Timeline
The document goes on to outline the need for a broad outline to be agreed by June and finalised in September, saying: “If that does not seem to be the case at the June meeting, the government will need to decide whether the UK’s attention should move away from negotiations and focus solely on continuing domestic preparations to exit the transition period in an orderly fashion.”
Johnson has previously warned that he is prepared to exit the trade talks without a deal, but this is the first instance of a timeline being given. The PM has already come under criticism for the plan given that the UK has until December 31st to negotiate a deal. Johnson has previously been criticised for his refusal to extend the deadline if a deal does not look ready in time though, in light of this week’s news, many are questioning whether the PM has any intention of trying to agree a deal at all.
Technical View
EURGBP ( Neutral, Bullish above .8534)
From a technical viewpoint. EURGBP has now climbed back above the monthly pivot at .8458 as the recovery off the .8274 level develops further. Price will soon test VWAP and the monthly R1 at .8534, which also holds a double-top. This will be a key area to watch and could fuel a return to downside. If price breaks higher here, the yearly pivot at .8688 is the next bull target.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!