EURGBP Rising as Trade Talks Begin

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Face-to-Face Talks Begin

A string of video meetings during lockdown seemed to do little to achieve progress on trade talks. As such, face-to-face trade talks began this week.

A UK delegation of negotiators attended talks with EU leaders in Brussels this week. The talks are due to alternate between there and London on a monthly basis, through to the summer break in August.

UK Pushing for July Deal Outline

Britain is pushing for an agreement on the outline of a deal by the end of next month.

Earlier in the year, the UK PM had expressed demand for it to be established by the end of this month. However, in light of the virus, which Johnson himself contracted, the UK is now extending the deadline to next month.

Johnson has warned that, should the new deadline fail to be met, the UK is prepared to walk away from the talks.

The PM wants this outline in place to allow for refining and fine-tuning over the summer. That way, the deal is prepared ahead of the European Council Summit in October, ready for EU leaders to formally approve it.

New Structure for Talks

With a firm deadline in place, the talks are reportedly going to be structured around one session per key item on the agenda. This will replace the previous strategy of extensive talks for several days.

These items include areas such as aviation, customs, fisheries, and more. These have seen little progress and David Frost, the UK’s chief negotiator, has claimed that talks on them have gone as far as they can for now. This is in reference to the video meetings prior to this week’s session.

Both sides are now pushing for greater intensity and focus within the talks to help deliver a deal in time. Given the economic damage to both economies from COVID-19 and with president Trump threatening fresh trade action against both, the need for an equitable resolution to this matter is growing daily.

Market Implications

Traders will now be keeping an eye on the progress of trade talks. Any stumbling or stalling is likely to result in downward pressure on both EUR and GBP.

Should talks ultimately fail and should the UK follow through on threats to exit the talks, this could be a very bearish situation indeed.

With the path of the pandemic over the winter unknown as yet, the economic fallout could be even more pronounced. This undoubtedly creates downside risks for both economies.

The EUR has been a better performer against USD than GBP recently. Therefore, any issues with these talks are likely to see EURGB heading higher in the short term.

EURGBP Breaks Out Above .9060


EURGBP has now broken out firmly above the .9060 resistance level. It is now approaching the top of the bullish channel. With the RSI not yet showing divergence, further upside looks likely here.

While the .9060 support level holds, this keeps focus on a challenge of the .9320 resistance level next.

Should any correction lower see a break back below the .9060 level, the bull channel low will be the next area of support to watch.

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