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Pound falls as Brussels warns talks likely to fail

Fri, 11th Dec 2020 10:22

(Sharecast News) - The pound fell against the euro and the dollar after Ursula von der Leyen warned trade talks with the UK were likely to fail.
The European commission's president told an EU summit on Friday morning there was a "higher probability" that discussions would fail rather than succeed, the Financial Times reported. With the latest deadline set for Sunday she said the main obstacles to agreement remained.

Her grim summary was in line with Boris Johnson's warning on Thursday that there was a "strong possibility" talks would fail. He said Brussels wanted to keep the UK "locked in the EU's orbit". The gloomy assessments followed a dinner on Wednesday evening after which von der Leyen and Johnson reported no progress.

Sterling was down 0.5% to €1.0895 and almost 0.6% to $1.3218 at 10:42 GMT, extending losses made earlier in the week. Comments from Bank of England Governor Andrew Bailey about the BoE's "extensive work" on negative interest rates also hit the pound.

The gloomy outlook for Brexit and the economy hit UK bank shares. NatWest fell 6.4% to 150.75p and was the biggest loser in the FTSE 100. NatWest's UK-focused rival Lloyds dropped 4.3% to 34.14p and Barclays declined 3.6% to 136.53p.

David Madden, market analyst at CMC Markets, said: "With respect to British-European relations, things have gone from bad to worse this week and now both sides are saying that a no-deal outcome is a very real possibility."

Both sides have given their negotiators until Sunday to come up with a breakthrough. The main sticking point is how to maintain a "level playing field" on rules and standards to make sure the UK does not undercut the EU. The EU has always been clear that the UK would not get a free trade deal while keeping the option of diluting standards to compete with the EU.

An ally of Johnson told the FT: "They [talks] aren't moving at all. It's screwed."



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