Brexit – Talks Hit Pause, with Calls for an Extension Beginning to Surface

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Brexit talks hit pause in response to members of the EU negotiating team testing positive for COVID-19.

Both sides agreed to suspend talks, as Barnier and other negotiators self-isolate.

It’s yet another delay ahead of what many had hoped would be an end to Brexit negotiations.

Thursday’s EU Summit had been touted as the final deadline going into this week. In the early part of the week, however, the talk of extending trade talks into next month left the deadline in doubt.

For the EU and Britain, time is rapidly running out, however. The Brexit transition period comes to an end at the end of this year. With COVID-19 hitting both the EU and Britain, an extension to the transition period could be a palatable outcome.

This week the news wires have already reported calls by Northern Ireland to extend the transition period.

It would be another game of cat and mouse, however, and extending the transition period will not be an easy process.

Until now, UK fisheries remain a major hurdle in getting over the line. The question will be whether France, in particular, would agree to an extension without a British promise of a compromise.

Such a play could look unfavorably for the French President, particularly with France depilated by the COVID-19 pandemic.

The British Pound

On Thursday, the Pound showed little reaction to the news of talks being suspended. Falling by just 0.09% on the day, the Pound was still up by 0.55% for the current week.

At the time of writing, the Pound continued to hold steady, up by 0.04% to $1.32608.

An extension to the transition period should provide the Pound with further support. That is assuming that the EU does not fall back into its rigid ways and continues to search for a way forward.

For the British PM and the Brexiteers, it would mean that there is yet more time to avoid ceding ground to the EU.

From a Brexit perspective, any compromise is likely to be considered unacceptable by the electorate and by Parliament.

Leaving the EU yet falling under EU rules and regs, while giving access to UK fisheries would be a bad deal.

GBPUSD 201120 Daily Chart

The Internal Market Bill

Away from the ongoing negotiations, one other key area of focus will likely be the Internal Market Bill.

With President-Elect, Joe Biden, clear on his stance, vis-à-vis the Good Friday Agreement, the Bill’s passage will be eyed closely.

Following the House of Lords vote against the Bill, it will return to the House of Commons for debate. Mindful of Joe Biden’s view and the possible implications on a U.S – UK trade agreement, the Tories will need to tread carefully.

For the British Prime Minister, the House of Lords vote could offer an easy way to pull the Bill. A trade agreement with the U.S, while also supporting the Good Friday Agreement would be a positive outcome.

Such a move even could lead to the U.S President–Elect’s involvement in the Brexit deal. The last thing that the EU needs is to be at odds with Joe Biden from the get-go…