The concessions on the part of the UK, on the one hand, is a step towards the EU, while on the other hand, does not, in any way, solve the disagreements that the two parties have on a number of key issues.
Yesterday, the UK announced that it is abandoning the most controversial provisions of the internal market bill. Earlier, the parliament has included a clause which stated that Northern Ireland will continue to follow the EU's custom's rules and its rule on product standards, which will make checks on goods traveling from Northern Ireland (a non-EU country) to the Republic of Ireland (an EU country) unnecessary. The cancellation of this law allows a return to the previous rules for regulating the supply of goods from and to the EU, with an undoubted plus that now, there is no need to create a physical border on Ireland.
But even if the UK decided to drop this provision, there are still a number of key issues that prevent the UK and the EU from concluding a deal.
- One of the pressing issues is that the parties differ significantly on access to fishing areas in the UK. Although some experts note that this issue does not have economic significance and is more political, the UK government does not agree on this and is not going to allow the EU into the waters of the UK.
- Another stumbling block is the principles of decision-making on the provision of state support. To put it simply, the EU wants an independent agency to be created in the UK, the purpose of which is to block government subsidies allocated to support businesses if necessary. The EU wants this so that money will not pour abundantly, as such would create problems on the development of European companies, which may have less funding. According to them, "independent guys" should control this issue.
- The legal regime imposed by the EU, according to which the UK will need to strengthen standards for labor protection, environment and social security, also raises many questions.
- The last point is the measures to which the parties can resort in case the other party violates a rule.
These issues are what politicians have been talking about over the past 8 months. Today, UK Prime Minister, Boris Johnson, met with European Commission President, Ursula von der Leyen, to try to resolve all these issues.
But if both parties fail to make concessions, then starting from January 1, 2021, general rules will come into force, according to which part of the trade turnover between the UK and the EU will begin to be subject to duties.
Therefore, today's meeting is very crucial, especially since the UK refuses to extend the transition period, and there is very little time left until the deadline of negotiations. In addition, a deal has to be concluded now since it will still have to go through the European Parliament and the British Parliament.
As for the GBP / USD pair, the technical picture remained the same. The target of sellers is still the level of 1.3340, a breakout of which will immediately bring the pound to quotes 1.2390 and 1.3220. Meanwhile, the bull market will resume if the pound consolidates above 1.3380, and such will push the quote towards 1.3440 and 1.3490.
EUR / USD
Yesterday, US Treasury Secretary Steven Mnuchin proposed a $ 916 billion bailout bill to the US Congress. According to him, House Speaker Nancy Pelosi is not against this. He also assured that 140 billion of this amount will be taken from the unused funds of the wage support program, while another 429 billion will be raised from the funds of the Ministry of Finance.
Meanwhile, incumbent US President, Donald Trump, made his own "adjustments" to the new aid package. He said that it is necessary to reduce the proposed amount of unemployment benefits, which are currently being discussed by both parties of the House of Representatives and the Senate, from $ 180 billion to $ 40 billion. This proposal drew criticism from the Democrats.
Aside from that, the presidential administration has asked Republican senators to include in the package a $ 600 direct payments to citizens. The $ 908 billion stimulus package currently under discussion does not yet include such provisions.
In any case, although adjustments and changes are being made, it is clear that the parties are moving in the right direction and, most likely, a common agreement will be reached in the near future.
The International Monetary Fund is actively monitoring this, and yesterday, its chief economist, Gita Gopinath said a US aid package amid the coronavirus pandemic would be very useful. Clearly, the IMF sees the need for assistance to state and local governments in the United States.
On the topic of COVID-19, the US Food and Drug Administration (FDA) said yesterday that Pfizer and BioNTech's vaccine is fully effective and could be approved as early as this weekend. Once permission is received, Pfizer can begin shipping it.
With regards to the EURUSD pair, a lot will depend on the decisions that will be taken today on Brexit. The breakout of 1.2177 will lead to a new bull market capable of bringing the euro to 1.2260, 1.2340 and 1.2420. But if the pressure on risky assets returns, and this will be due to failed trade negotiations, the quote may move below 1.2080, which will lead to a further collapse towards 1.1990 and 1.1880.
