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What we need to know before the key EU-UK meeting next week
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Loading...Expectations for the key EU-UK summit are high, after the UK's Brexit negotiator said the deal is "close". However, Brussels is of the opinion that there will be no breakthrough.
Brexit negotiators work "day and night" to conclude a deal, that will allow them to continue the business process in the best possible scenario. At best case, the teams will be able to make "decisive progress" early next week, paving the way for a successful European summit on Wednesday.
European leaders meeting in Brussels on Wednesday will listen to Britain's Prime Minister Teresa May and decide whether there is room for completion of the so-called trade agreement.
"What I can say on our part today, Thursday, October 11, is that we have not yet reached an adequate solution." Intense talks aim to find out if we can achieve the decisive progress we have mentioned yesterday, "Margaritis Shinas, spokesman for the European Commission.
He added: "We are working hard to reach an agreement."
The main obstacle remains the border between Northern Ireland and the Republic of Ireland.
There are different options for the border issue, but EU negotiator Michel Barnier suggested on Wednesday that in order to avoid the physical border between the two sides of the island, Northern Ireland still needs to be part of the EU single market (a region, in which goods, people and services move freely).
"We expect the exit agreement to be completed by November, but the risk of a" no deal "will remain high, due to the possibility that it will not survive the ratification process," said Daniel Haralambus, a UK analyst at the Economist Intelligence Unit.
Once the negotiators have signed the exit agreement and the EU leaders agree - which will happen in mid-November - this deal must be approved by the parliaments of Europe and the UK - the so-called ratification process.
"In the UK Parliament, members of the government are dissatisfied with the direction May has taken, and MEPs have already declared their intention to vote against the UK exit deal," Haralambus noted.
This in itself could lead to the overthrow of the government, as this would mean that the conservative agreement with the GMP would no longer exist.
How would it all affect the GBP?
If negotiators are able to find a solution to the Irish issue next week, the GBP will likely see strong growth. Currently, however, the currency remains unstable because of the many different expectations for the next week. I expect the uncertainty around the pounds to be maintained, not excluding sharp speculative movements in both directions. A failure of the negotiations would send the GBP to new bottoms, and through Bank of England's prism, we will probably see the bank's plans to tighten the monetary policy further.
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