Barnier Calls EU Fisheries Meeting….A Deal Close?
Markets were frustrated at the lack of Brexit trade talks headway, especially with time pressures continuing to increase and fears over transport disruption in January.
Underlying confidence in the UK outlook remained weak following Wednesday’s spending review which continued to limit potential buying interest. There were also concerns that over 40% of England would be in the strictest coronavirus tier once the lockdown ends next week.
There was no further impetus from broadly favourable risk conditions with equity markets subjected to correction. The UK currency was unable to break above 1.3400 against the dollar which helped trigger a correction and the Euro also regained ground to the 0.8930 area.
After the European close there were reports that Barnier had called an urgent meeting of EU fisheries ministers for Friday. There were also reports that the EU negotiators were heading to London for face-to-face talks over the weekend, but sources indicated that talks were still stuck. The EU Commission also stated that EU decisions on equivalence for UK financial services would not be ready for the start of January. In this context, the EU will look at how to bridge the gap between a decision and the end of transition. Sterling held steady on Friday to trade around 1.3360 against the dollar with the Euro near 0.8920. There will be the risk of choppy trading on Friday amid Brexit headlines and pre-weekend position adjustment, especially given the potential for a sharp move at the Asian open on Monday.
Trading activity was inevitably curbed by the US Thanksgiving Holiday and activity will also be limited on Friday which may lead to narrow ranges. There was some evidence of month-end dollar selling which may continue on Friday and the US currency held just above 12-week lows in early Europe with the euro near 1.1925.
Eurozone M3 money supply growth strengthened slightly to 10.5% in the year to October from 10.4% previously while private lending growth held at 3.1%.
The ECB’s minutes from November’s meeting expressed reservations that the pandemic could have a longer-lasting effect on both demand and supply within the economy. It was also likely that inflation would stay in negative territory for longer than expected whilst being able to act at any time if necessary.
The Euro drifted lower following the ECB rhetoric with on going selling interest above 1.1900 against the Dollar. The single currency was also undermined by the ongoing EU budget row as Poland and Hungary continue to refuse to accept a compromised proposal which could put the recovery fund at risk.
As of the writing, the Euro currently trades over the 1.1930 mark against its US counterpart.