It’s been a relatively flat European session so far and US futures are pointing to a similar start on Wall Street as negotiations on both sides of the Atlantic go into a critical weekend.
Both negotiations are being fiercely fought right up to the wire but I remain confident that both will be done. It seems the first to be ticked off will be a stimulus deal and spending bill in Washington, with both sides appearing very close to agreement after months of wrangling. It may just turn out to be a bridge to another package in the new year but that’s better than the alternative and sees the country through to the new administration, providing critical support in the interim.
Senate Majority Leader Mitch McConnell reportedly warned lawmakers that a weekend vote may be necessary. At the very least, work will likely carry on into the next couple of days. Combined with the European Parliament’s insistence on a deadline for Brexit talks of Sunday, there’s an unusual amount of weekend risk in the markets which may weigh on sentiment as the day progresses.
Of course, deadlines have come and gone in both cases—granted, far more on the Brexit side—and I’m not sure anyone will be entirely surprised to see talks still ongoing on Monday or even right up until the new year.
That would be a massive gamble on the UK’s side as the process would then become far trickier with the EP refusing to ratify it by the end of the year and rush any agreement through. There are other undesirable options, such as the EU provisionally applying any agreement until the EP votes on it in the new year and given how these negotiations have gone since day one, a part of me would be surprised if this doesn’t happen.
If the UK believes the EU would accept this in order to avoid a no-deal, temporarily or permanently, it may well gamble on this to buy a little extra time if it doesn’t believe the EU is being flexible enough. Where there’s a will there’s a way and one thing is clear, there is a will. Unfortunately, just not a will to get this wrapped up in good time.
Weekend nerves are once again creeping in for the pound. which is off almost half of one percent against the dollar, euro and swissy. That’s nothing compared to what we’ll see if talks collapse over the weekend and we may see it move more in this direction ahead of the close.