Sterling has lost some ground overnight after a dinner meeting between Boris Johnson and the European Commission President failed to make a Brexit deal breakthrough.
Downing Street have said that “very large gaps remain”, however the two leaders agreed that talks should continue over the coming days and “that by Sunday a firm decision should be taken about the future of the talks”. If progress is made ahead of Sunday, the talks are expected to continue into next week. It has been reported this morning that the EU could still ratify a deal before the end of the year if agreed by the 18th December.
The lack of progress for a deal with such little time left has taken a bit of an edge off the Pound, although the FX market remains relatively unphased. Many analysts still believe that a thin trade deal is the most likely outcome. Certainly some Sterling traders’ nerves are being tested more heavily as the talks go down to the wire.
EU leaders are meeting today and tomorrow but Brexit is not expected to be a large part of their discussions. The focus will instead be upon handling the Covid crisis and gaining approval of a huge stimulus package ($2.2 trillion). Euro traders will be closely watching to see if they approve the package, which will support the worst Covid-affected economies within the Bloc.
As a result, the Pound has lost around 1-cent against both the Euro and USD. The EUR/USD continues to trade at high levels and around the 1.21 mark. Traders’ eyes will turn to this afternoon’s ECB interest rate meeting where they’re expected to increase monetary stimulus but they will also be listening out for potential comments on the strength of the Euro.