UK PM Theresa May will do her best to end the Brexit stalemate with the EU in dinner with EU Commissioner Jean Claude Juncker. It will be a series of meetings ahead of Thursday’s crucial EU summit over Brexit, which will determine the balance between EU’s insistence that Britain pays the exit bill and reaching a comprehensive agreement over EU citizens’ rights in the UK. FX traders will also be busy watching key UK data on inflation (Tuesday), jobs and earnings (Wednesday) and retail sales (Thursday). Not to mention BoE governor Carney’s testimony to Parliament on Tuesday (11:15 am London time).
Thursday’s Brexit Summit
European Union leaders are likely to open talks with the UK on a sour note by insisting on blocking any post-Brexit transition talks due to the lack of agreement on UK’s exit bill. But all is not lost. The EU will show some good faith in recognition of some progress by getting Michel Barnier, its lead negotiator, to begin preparatory discussions on a transition and the future of the UK-EU relations. They will focus on UK PM May’s Florence speech where she mentioned the €20bn post-Brexit bill and her constructive draft on the topic of citizens rights.
David Davis, the UK’s lead negotiator, continues to implore EU leaders in allowing Mr. Barnier to move forward with the topic of “transition period” instead of merely focusing on requiring the UK to explicitly agree on the final Brexit bill.
Lowering the Bar of Expectations
Although most EU diplomats expect chancellor Merkel to hold a firm line, several members are now viewing this as a way to lower the expectations ahead of Thursday’s summit in order to “produce a positive surprise”.
If no progress is made this week, GBP traders will push the Brexit folder to their December diary and focus on UK data, and next month’s BOE meeting /inflation report. Any surprise step towards extending UK transition period will be GBP-positive as has been demonstrated late last week.