EUR / GBP eyes turn to 0.9100 as Brexit talks remain stalled

• EUR / GBP has been climbing towards 0.9100 on Friday, failing to sustainably push below 0.9000 this week.
• The weight of the British pound is a combination of Brexit concerns, the BoE’s dovish speech, and worsening Covid-19 trends.

Having failed to sustainably stay below the 0.9000 level on Wednesday and Thursday, the EUR/GBP is on Friday retreating towards the 0.9100 level as Brexit negotiations remain at odds. Currently, the pair is trading at 0.9060, slightly below the day’s highs at 0.9083 and rising around 30 pips or 0.3%. On the day, the British pound is the worst performing currency in the G10 and is down about 0.7% against the US dollar.

Brexit remains stagnant

The latest news on the state of Brexit negotiations does not paint an optimistic outlook that a deal will be reached in the next few days or indeed in time for ratification on both sides of the English Channel before the end of the year. .

EU sources who spoke to Sky reportedly said that the EU and the UK are clearly still far apart on fisheries, but also noted that differences continue to exist on a level playing field, rules of origin, state aid and supply. of the domestic market. The source added that it is impossible to say whether or not we will end a deal.

This comes after Thursday’s call between UK Prime Minister Boris Johnson and EU Commission Chair Ursula von der Leyen went awry, with UK Prime Minister stressing that the talks are in a serious place and that the EU will have to change its position, particularly on fisheries, to a great extent. margin to be a deal.

Not all the news has been bad; EU Brexit negotiator Barnier is reportedly in talks with EU coastal states to make a more favorable rebate offer regarding continued access to UK fisheries. He reportedly believes that if he can get an improved offer there could be a deal, although UK sources have not addressed whether or not this might be the case.

Meanwhile, reports also suggest that individual EU countries will be able to (temporarily) bypass the EU parliament and immediately ratify any trade deals that may be reached at the last minute before the end of the year. If true, this helps eliminate the risk of “accidental” non-dealing.

Moderate BoE, Covid-19 trends also weigh on the British pound

Some other factors are also likely to contribute to the sterling underperformance on Friday. First, another member of the Bank of England’s Monetary Policy Committee has spoken in favor of negative rates; Gertjan Vlieghe said the negative rates could help the UK complete its economic recovery. In addition, he argued that any rate cut must be greater than 10 basis points to have an effect and a combination of rate cuts and more QE would be the most effective means of further easing monetary conditions.

Elsewhere, the latest estimate of the Covid-19 R rate (the number of people to whom each infected person transmits the virus on average) in the UK is available and is in a range of 1.1-1.2 since the last estimate less than 1.0. The estimated daily growth rate of infections is now 1 to 4%, up from -2.0% to 0% previously. In London, the outlook is even more worrying with the R rate estimated at 1.1-1.3 and the daily infection growth rate estimated at 3-6%. Government scientists are already talking about imposing another national blockade after Christmas that would be even more severe than the November blockade.