City analysts wait for a Brexit deal too important not to be done
City analysts continue to believe that a Brexit trade deal will be done, even as talks remain unfinished just 8 days before the UK’s departure from the EU.
Fears of a so-called ‘no deal’ Brexit have hung over markets for more than four years, but many respected watchers simply believe a deal is too important a priority for talks to fail.
Markets.com’s Neil Wilson told Morning Wire that it was “always darkest before the dawn.”
Fishing remains one of the key issues to be resolved.
A report in today’s Financial Times that a deal was close to being brokered on rights to UK waters was swiftly rubbished by a source close to the Brexit negotiations when approached by Morning Wire
“Clearly a deal is in everyone’s interests and whatever the detail on fishing is right now, it will long be forgotten in a few years when the dust is settled,” said Wilson.
CMC Markets chief analyst Michael Hewson told Morning Wire last week that it would be a “failure of statecraft” if a deal wasn’t struck.
And City grandee David Buik said today that he surmised “there will be a severely watered down agreement for a trading relationship. There has to be.
“Both economies are in such a grave state that refusal to come to an agreement would be an act of recklessness,” he continued.
Some offered a word of caution. Susannah Streeter at Hargreaves Lansdown said she thought chances of a deal were “higher” than they had been but cautioned against any certainty.
“It’s possible there have been meaningful concessions and both parties may be approaching some middle ground. On the other hand, a game of political face-saving could be underway with nobody around the table wanting to be seen as the first to walk away from a hopeless stalemate,” she said.
Sterling slips, but not a lot
Despite chaos at the UK’s borders with the EU as well as the fear of a no-deal Brexit, sterling has not slid as much as some predicted.
If a deal isn’t done, however, analysts predict that may not be the case for much longer.
“Sterling is staging a recovery from yesterday’s double-blow of Brexit deadlock and the Covid travel bans imposed on the UK,” said Streeter.
“But it is likely to be battered again if negotiators fail to come up with the goods,” she warned.
Wilson imagines that a deal, when it comes, will come “very, very fast.”
“That’s why sterling is holding up pretty well – no-one wants to miss out on the jump when it happens,” he told Morning Wire.
Call of the mild
Ursula von der Leyen and Boris Johnson spoke on Monday about the need to get a deal, and are reported to have had a cordial phone conversation about negotiations.
But the question remains: will a deal get over the line? City analysts are betting it will – which could mean the reaction if Britain doesn’t would be all the more severe on currency markets.