French PM Warns Over Trade Talks

Concerns over the soon-to-begin EU/UK trade talks increased further over the weekend. This was in response to comments made by French President Emmanuel Macron.

Speaking at an event over the weekend, the French premier told the audience that he expects the negotiations to be “tense” when they begin in March.

Macron went on to say that he’s “not sure that an agreement will be reached between now and the end of the year”.

Deadline Raises Risks

The end of year deadline has become a key focal point for the talks. Especially given that UK PM Boris Johnson continues to reaffirm his position that he will not extend the deadline.

Johnson has repeatedly said that he is prepared to leave the transition period without a trade deal rather than extend the deadline any further.

UK to Publish Trade Deal Demands

This week, we’re expecting the UK government to publish its mandate for the trade deal. However, the recent statements from both EU and UK leaders are still very far apart in terms of the desired terms of such a deal.

The EU is insisting that the UK will continue to abide by some EU regulations in return for a deal. Meanwhile, the UK insists that it will only enter a deal if it can retain full sovereignty.

The full details of the UK’s demands for the deal are coming out on Tuesday. They will then be presented in parliament on Thursday.

The UK’s chief Brexit negotiator, David Frost, said that the UK is seeking a Canada-style free trade agreement. We expect the forthcoming mandate to reiterate this message.

Stand-Off Continues

However, speaking in Brussels last week, Michel Barnier (the EU’s chief negotiator) warned that such a deal cannot be granted given the “particular proximity” of the UK to the EU.

There have also been widespread concerns about the likelihood of the two sides agreeing on a deal within the current timeframe.

Negotiations between the two economies will begin on March 2nd. This provides a ten-month window for a deal to be agreed upon. Therefore, we can expect the ongoing progress of the talks to be a key factor for both EUR and GBP price-action.

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