Leaders Clash Over Demands
The outlook for the UK and EU has deteriorated a little this week as fears mount over the trade-standoff between the UK and the EU. Following the very disparate visions set out by UK and EU leaders in opening statements a few weeks ago, tensions increased this week as UK and EU leaders clashed again.
Speaking at the European Parliament summit on Tuesday, the EU’s chief negotiator Michel Barnier warned that the EU will not offer the UK a “Canada style” trade-deal mostly due to the “very particular proximity” between the UK and the EU.
Barnier added that the EU is “ready to offer the UK and ambitious partnership” but clarified that it would be "A trade agreement that includes in particular fishing and includes a level playing field, with a country that has a very particular proximity. A unique territorial and economic closeness, which is why it can't be compared to Canada or South Korea or Japan."
Barnier’s comments come in response to those made on Monday by David Frost, head of Boris Johnson’s “Taskforce Europe” (the ministerial team tasked with running the trade talks) who said that the UK will not agree to the EU’s demands around so-called “level playing field” regulations. Frost said “It is central to our vision that we must have the ability to set laws that suit us – to claim the right that every other non-EU country in the world has.
Frost went on to say “So to think that we might accept EU supervision on so called level playing field issues simply fails to see the point of what we are doing. It isn’t a simple negotiating position which might move under pressure – it is the point of the whole project.”
Barnier was also keen to refute Frost claims that the adhering to the EU’s demands would impinge on UK sovereignty, saying: “Truly not. It is a sovereign decision of the EU, it is a sovereign decision of the UK to cooperate.”
Hope For Compromise
These opening statements, ahead of any official meetings between EU and UK leaders raise serious doubts over the likelihood of the two sides being able to agree a deal within the current 11-month timeframe. However, it is worth remembering that there is likely a great deal of political posturing involved at this stage and also, that ahead of negotiations, the two sides are simply beginning with their most aggressive demands. Some compromise and diluting of these demands is expected. However, it is fair to say this certainly hasn’t been the most encouraging start to negotiations.
Technical View
EURGBP (Bearish below .8459).
From a technical viewpoint. EURGBP is now sitting at the 2019 lows of .8274 which are holding as support for now. However, with longer term VWAP still negative and price action looking bearish, a break lower could be seen, eyeing the yearly S1 .8059 next. Any reversal higher from here would need to quickly move back above the monthly pivot at .8459 to reduce downside pressure.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!