Talk of A Brexit Deal Brings Hope But Key Issues Still Remain As Time Runs Out

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Brexit To-Do List

Ahead of the agreed March 2019 departure date, there are two things that need to happen. The first is for both the UK and the EU to establish a deal around the withdrawal agreement that will cover everything regarding the UK’s exit, such as its financial commitments, the transition period to be honored and importantly, the Irish border. Secondly, the objective of both sides is to establish a “political declaration” on the goal of trade talks with a view to agreeing on a deal on future trade between the UK and the EU. These trade talks are unlikely to take place until after the official departure date.

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Barnier Signals Hope For Deal

Since the Article 50 process began last year, the key goal has been to establish both the withdrawal agreement and a political declaration in time for the October EU Council meeting. The thinking was that this would allow enough time for each EU member state to approve and ratify the agreements. Publicly, the UK government has reaffirmed its message that it remains “confident” of a deal being achieved by this point and given recent comments by EU Brexit negotiator Michael Barnier who said that the EU is prepared to offer the UK a trade deal unlike any other it has offered, it seems like this could be achievable.

Issues Remain

However, major issues remain, specifically within the UK political environment. A major rift in PM May’s Tory government has the potential to stop the PM from agreeing to any deal and so too does the issue of the “Irish backstop”, an issue upon which both the EU and the UK remain firmly polarised. The EU is adamant that the issues be dealt with in a way which is specific to Northern Ireland. However, the government has warned that is fearful of such a solution creating barriers and tension within the UK.

Potential For Compromise on The Irish Border Issue

There are some small signs that a compromise could be achieved, however. Speaking over the summer, Michael Barnier said that language around the issue could be “de-dramatized”, involving efforts to reduce any physical border infrastructure from being implemented. Furthermore, UK PM May is reportedly pursuing a commitment from Brussels to enact a temporary UK-wide customs arrangement in the event of the Irish backstop being activated which would avoid any cliff edges for UK businesses.

Benefits To May Of Waiting To Agree On A Deal

Despite these signs of progress, however, we are yet to see anything set in stone and so for now, the issue remains in the air. Although it seems highly unlikely that MP May would leave the negotiations without an agreement it is also unlikely that she will want to be seen to be conceding too much ground ahead of the UK conservative party conference at the end of this month given the increasing pressure on her from Brexiteer MP’s not to back down over the border issue.

theresa may

Last Chance Saloon In December

Considering the timing then, it seems that there is definitely a motivation for May to leave it as late as possible before agreeing to a deal on the issue. Furthermore, the later the PM can leave it before putting it to a vote in Parliament, the more clear-cut the decisions will be between voting in favor of a deal or backing a “no deal” Brexit.

In terms of gauging how late the PM can leave it, the very latest would appear to be the EU Council meeting in December as the agreement still needs to be ratified by EU member states which would point to a UK Parliament vote around mid-January. The issue for the market is that the closer we get to March 2019 without a deal being agreed, the greater the level of market uncertainty and the more volatile markets are likely to become.

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With over 6 years’ experience analysing currency markets, James is now a well-known industry analyst focusing on price action trading and fundamental drivers. Beginning as a private retail trader, James developed a strong interest in understanding the fundamental aspect of the market before pursuing technical trading capabilities which he now uses to identify opportunities over a short-term horizon. Alongside his market experience, James is also IMC certified having achieved the qualification to help further his understanding not only of the markets but the industry as a whole. James has a strong interest in both fundamentals and technicals and uses both forms of analysis in generating and executing trade ideas, with trades generally lasting from a few hours to a few days.

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With over 6 years’ experience analysing currency markets, James is now a well-known industry analyst focusing on price action trading and fundamental drivers. Beginning as a private retail trader, James developed a strong interest in understanding the fundamental aspect of the market before pursuing technical trading capabilities which he now uses to identify opportunities over a short-term horizon. Alongside his market experience, James is also IMC certified having achieved the qualification to help further his understanding not only of the markets but the industry as a whole. James has a strong interest in both fundamentals and technicals and uses both forms of analysis in generating and executing trade ideas, with trades generally lasting from a few hours to a few days.

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