Pound swings as Barnier warns just 'hours' to strike Brexit deal

Tom Belger
·Finance and policy reporter
·3-min read

The pound fell on Friday as EU chief negotiator Michel Barnier said Brexit talks had reached a “moment of truth,” warning there were just a few hours left to reach a breakthrough.

Sterling fluctuated in morning trading in London, and was 0.5% down against the dollar (GBPUSD=X) at $1.352 shortly before lunchtime, and down 0.3% against the euro (GBPEUR=X) at $1.103.

Investors weighed up conflicting signs over progress in Brexit trade talks and UK retail figures. The pound’s decline came after it had hit a two-year high against the dollar on Thursday.

EU chief negotiator Michel Barnier warned both sides stood at a “moment of truth” in the talks, saying there was only a “very narrow” path to an agreement.

“We’re not asking more nor less than a balance between rights and obligations and reciprocity, access to our markets and access to our waters and the other way round, no more, no less,” he told the European Parliament on Friday morning.

“It’s also obvious that this isn’t an agreement we will sign at any price or any cost.”

READ MORE: UK retail sales go into decline for first time in six months

The pound wobbled against the dollar in early trading on Friday (18 December). Chart: Yahoo Finance UK
The pound wobbled against the dollar in early trading on Friday (18 December). Chart: Yahoo Finance UK

Prime minister Boris Johnson warned late on Thursday after another call with European Commission president Ursula von der Leyen that it looked “very likely” Britain would leave without agreement.

He said negotiations were in a “serious situation,” with time short and gaps still over the EU’s ‘level playing field’ demand and fishing.

Downing Street said in a statement that Johnson had stressed the EU’s position on fishing was “simply not reasonable” and had to shift “significantly” for an agreement to be reached.

WATCH: Boris Johnson tells EU to shift its stance 'substantially' with trade talks in 'serious situation'

But the statement also said gaps had narrowed on the level playing field question, and hinted in more detail than usual at only two specific sticking points on fishing. Britain could not accept a lack of control over its owner waters “for an extended period,” and could not accept fisheries quotas “which hugely disadvantaged its own industry.”

Meanwhile von der Leyen said bridging gaps would be “very challenging,” but said there had been “substantial progress” on many issues. Similar references to progress by EU chief negotiator Michel Barnier had helped sterling rally on Thursday.

Negotiations are set to continue on Friday, with Sunday increasingly seen as the latest deadline for progress if a deal is to be ratified by legislators on both sides by the end of the year.

READ MORE: Gove admits UK could face weeks of border disruption in January

Sterling secured only a brief fillip from data on UK retail sales, showing a less severe contraction in November than expected. It marked the first decline in six months, but one analyst called a 3.8% fall “relatively modest.”

Much of the UK faced tighter lockdown restrictions last month including a shutdown of ‘non-essential’ shops in England.

The pound recouped some of its overnight losses briefly on the data at around 7am local time before falling off again.

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