Talks Head Into Final Stretch
As Brexit trade talks between the UK and the EU continue to trundle towards the December 31st transition phase deadline, it is still very difficult to attach any significant likelihood to a deal being agreed. The talks which were delayed and interrupted by the COVID pandemic have been a slow and laboured process which, so far have yielded very little in the way of tangible progress. With both sides still widely at odds over several key aspects of the deal, time is running out and neither side (as yet) seem willing to make a decisive compromise that would foster a deal.
EC President Warns MEP's
Ursula von der Leyen, head of the European Commission, told MEP’s this week that they should be prepared for a hard Brexit given the remaining headwinds to agreeing a deal. While the EC head said that there has been “genuine progress” she added the caveat that “frankly I cannot tell you today if, in the end, there will be a deal.” Adding detail, von der Leyen said: There are still three issues that can make the difference between deal and no deal. The crucial topics for the European side are, of course, questions linked to the level playing field, governance and fisheries.” Von der Leyen went on to say: “With very little time ahead of us, we will do all in our power to reach an agreement, we’re ready to be creative."
However, creativity does not necessarily imply compromise which, ultimately, is what is needed at this stage. In a sign that the EU would not be striking any significant compromise, von der Leyen said: “We are not ready to put into question the integrity of the single market, the main safeguard for European prosperity and wealth. No one questions the UK sovereignty in its own waters. But we ask for predictability and guarantees for fishermen and fisherwomen, who have been sailing in these waters for decades, if not centuries.”
Currently, markets are focused on the developments within the COVID vaccine space, and the implications that has for the currency markets and broader financial markets. However, if these talks do ultimately fail and a hard Brexit is activated, this could quickly cause a sharp re-pricing in EU and UK assets alike.
Following the breakout above the bearish trend line from summer highs and the `6123.3 level price has stalled ahead of the key 6518.2 resistance. This was the post-recovery high from the summer and is now the high watermark for the FTSE. With bearish divergence noted among this recent holding pattern, there are risks of a correction back towards the 6123.3 level. However, while this level holds, the near term bias remains bullish.
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