The pound lost ground against the euro and the dollar after a summit between UK prime minister Boris Johnson and European Commission president Ursula von der Leyen failed to deliver progress in Brexit trade talks.
Johnson travelled to Brussels on Wednesday for a three-hour working dinner with his European counterpart. Talks ended with little progress. A Downing Street source said late on Wednesday night that “very large gaps remain” after “frank” discussions.
UK and EU negotiating teams will resume talks on Thursday but both sides set a deadline of Sunday (13 December) to make a final call on the trade negotiations.
“We understand each other’s positions,” Ursula von der Leyen wrote on Twitter. “They remain far apart... We will come to a decision by the end of the weekend.”
The pound fell sharply after the briefings from the dinner on Wednesday night and remained under pressure on Thursday morning. Sterling was down 0.5% against the euro to €1.1004 (GBPEUR=X) in early trade in London and down 0.4% against the dollar to $1.331 (GBPUSD=X).
Marshall Gittler, head of investment research at BDSwiss Group, said the pound had retraced gains made on Wednesday ahead of the dinner. The retreat reflected dashed hopes of a breakthrough at Wednesday’s summit, he said.
“It does look as if failure is pretty well discounted in the market, although you never know till you see its ugly face staring at you,” he said. “Perhaps everyone has the same idea: that as always with the EU, agreement will come in the last possible five minutes.”
Gittler and other analysts said there was a sense of deja vu about Sunday’s Brexit deadline. Several other supposed deadlines have repeatedly passed in trade talks with little impact.
UK foreign secretary Dominic Raab told the BBC it was “unlikely” negotiations would be extended beyond the weekend but said he “can’t categorically exclude it.”
Negotiations remain stuck on the issues of fisheries, level playing field rights, and enforcement of any final deal, Raab confirmed.
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