Cable Plummets On Report Brexit Talks Headed For "Catastrophic Breakdown" If No EU Compromise

Having traded near sessions highs most of the morning session, sterling suddenly tumbled (even if Gilts refused to move) following a Bloomberg report that the UK is said to see Brexit breakdown if the EU refuses to compromise. In immediate kneejerk reaction, GBPUSD plunged 50 pips, to session lows on fears that Theresa May's visit to Brussels will be meaningless and just another opportunity for Juncker to get drunk.

As Bloomberg adds, Brexit negotiations are heading for a "catastrophic breakdown" unless the European Union signals this week that it will allow talks to move on to trade, according to a person familiar with the U.K. government’s position.

While the headline is likely just another trial balloon meant to send a message to Brussles, Bloomberg notes that without a clear sign that negotiations will progress to trade and transition arrangements by December at this week’s summit of European leaders, "the entire Brexit process will be in danger of collapse - and senior British ministers are losing faith in the EU’s willingness to strike a deal", a Bloomberg source said.

Speaking on condition of anonymity, the person said Prime Minister Theresa May took a political risk by promising to pay into the EU budget and settle the divorce bill in a speech in Florence, Italy, last month and now needs something in return before she can make further concessions. As reported earlier, the assessment comes as the prime minister heads to Brussels for dinner with EU chiefs ahead of a critical summit starting Thursday, and is calling EU leaders individually in last-minute diplomatic efforts. May will spend 90 minutes talking with European Commission President Jean-Claude Juncker and the bloc’s chief negotiator Michel Barnier on Monday in an attempt to break the deadlock in the negotiations.

Some more details from Bloomberg:

Germany and France made clear on Friday they want to toughen the tone of a declaration that’s being prepared for the summit, according to an official familiar with the discussions. The latest draft already offered the U.K. little beyond encouraging words and a call for Barnier to start preparatory discussions on trade talks -- but only within the European side.

 

Talks have stalled because Britain won’t detail how much it’s ready to pay as it leaves the bloc until the EU starts discussing the future trading agreement and the transition that Britain wants to smooth the split. Europe says it won’t do that until May’s government takes steps toward an agreement on the bill. With or without a deal, the U.K. will leave in March 2019.

 

German Chancellor Angela Merkel and French President Emmanuel Macron are the two key obstacles to allowing talks to move on to trade, according to the first official. Germany has a vested interest in delaying progress in the Brexit talks because Frankfurt is trying to tempt companies away from London, the person said.

Meanwhile, Euroskeptics in May’s Conservative Party want her to “call time” on the negotiations and walk away without a deal. She needs the EU now to create the atmosphere and the space for her to make any further concessions, because her political position at home is so precarious, the person said.

Since so far no compromises have been offered by any Eurocrats, tonight's unexpected Theresa May dinner and drinks with Juncker could make or break the Brexit process, not to mention cost May her job.

Comments

Ghordius chubbar Mon, 10/16/2017 - 09:37 Permalink

lol. I love those utterly non-sensical "arguments"what does it mean, "The EU doesn't have a standing army" in the first place?besides the fact that there are no armies involved, it's just a trading negotiation?no, the EU does not have a standing army. phew, eh? now, try this: do the members of the EU have some?France, Germany, Italy, Spain, just to number four of them?"Britain has plenty of trading partners..." correct. now... what did those members say, before the referendum? "go ahead, it's a swell idea"? did they? or... did they say actually something in the tune of "are you frigging crazy"?

In reply to by chubbar

Kayman Ghordius Mon, 10/16/2017 - 10:02 Permalink

Changing the EU from a trading bloc to a political bloc has created this process of unravelling. Britain has lots to lose if the EU remains intransigent, but Britain is not landlocked and can make bilateral deals that are less onerous than the dictates of Brussels.And aside from welfare, and robbing from the future, what has Europe got that it can export to world? German cars suppressed in price via the Euro. And faux moralism about taking your "fair share"of the Muslim hordes. Sounds like a solid glue to keep the collective of the European common together, n'est pas?

In reply to by Ghordius

Ghordius Kayman Mon, 10/16/2017 - 10:22 Permalink

meh. it started in Rome as a political bloc, 60 years ago. the UK was invited, and answered "no"later, the UK asked to join, and France said: "non". later, one French referendum said "oui" and "let them in"1973 the UK joined. after Maggie Tatcher campaigned for it to join, note. with a referendum. and the others complied to this requestas soon as the UK was in, they asked for more common market, more trading bloc. and the others complied to this requestlater, Maggie Tatcher asked for a rebate. and the others complied to this requestlater, the UK asked for admission of all those eastern countries, the "enlargement". very vocally, note. and the others complied to this requestlater, the UK started to ask for opt-outs. particularly on the euro, but practically on all fields, including on the original political "ever closer union" that was stated in Rome, 60 years ago. and the others complied to this requestnow, the UK gov triggered Art. 50 to leave the EU. do you see... a pattern, somewhere?

In reply to by Kayman

waspwench JohnGaltUk Mon, 10/16/2017 - 16:35 Permalink

The EU have already made it crystral clear that they will not negotiate and that they intend to make things as difficult as possible for the UK.   Their strategy is to make it so difficult to leave that the UK will abandon the attempt.   The EU is not a democracy.   It is run by an unelected bureaucracy and so they do not understand that the UK must leave, even if the UK political class (including remainer May) would like to remain.That being the case, there will be a hard Brexit and the sooner we get it over with the better.   Times will be tough, there will be pain, but the UK will survive and, eventually, thrive.

In reply to by JohnGaltUk

TeaClipper Mon, 10/16/2017 - 09:00 Permalink

The UK and the EU are both signed up to the WTO and its rules of play, so no deal making required. A hard Brexit will bring the Fourth Reicht to its senses, after all they have no choice. May is a remainer, which is why we are going through this charade.

Yancey Ward Mon, 10/16/2017 - 09:04 Permalink

This is all kubuki theater- on both sides.  The goal since June 2016 has been to build the justification for a second referendum in Great Britain.  The way to do this is dick around for a year and a half, then force a hard break point that the Tory government will then say has to be voted on in a second referendum since the first one was predicated on a negotiated exit, not a hard one.  Watch and learn.

bshirley1968 Mon, 10/16/2017 - 09:08 Permalink

"Cable plummets"!  BFD!Borrowing a country's currency is like shorting stock. The "plummet" just made the insiders a bunch of money.  What a farce the whole system has become.  Well its a farce until you want them to leave you alone........and then your prison cell becomes very real.They get to do as they please, change the rules to suit them whenever they like, are immune from prosecution,  and will imprison or kill you for any resistance to their designs.This whole negotiation is nothing more than smoke and mirrors to buy time to get processes and regulations in place that will give people their Brexit in name only. .....the end results will be the same or worse than it is now.  No one......and I mean no one......gets to break up the collective by voting.  The collective is all that is important and must be served and maintained at all cost. 

bh2 Mon, 10/16/2017 - 09:05 Permalink

Brits need to quit farting around with the EU and just go hard Brexit. They have no hope of gain and every certainty of loss if they continue this charade.

EddieLomax Lockesmith Mon, 10/16/2017 - 11:57 Permalink

Because they want to build up some sort of narrative that has them as the good guys, as people who negociated but the UK were not good enough to obtain a deal.Reality is, if the UK walks away and concentrates on deals outside the EU then the EU will be standing there bollock naked.  I'll love to hear how Merkel and Macron explain to 100's of thousands of their voters why there is now a 12% tariff on their car exports.  If Trump really is smart he'll step in and clean up here, its an easy win.

In reply to by Lockesmith

AR15AU Mon, 10/16/2017 - 09:12 Permalink

naw, they are just getting desperate in the gold pit and needed to engineer a sudden dollar spike to try to save their ass from what is about to unfold... notice it had no effect

Funn3r Mon, 10/16/2017 - 09:13 Permalink

Sick of hearing keyboard warriors yapping about brexit. "We hate foreigners! kick out immigrants! Show Brussels who's boss!"Not one in a hundred has any idea of the economic and political pros and cons of staying/leaving. 

Ghordius medium giraffe Mon, 10/16/2017 - 09:44 Permalink

joining is/was done by... treaty. the hallmark of sovereignty, actuallyif you are not sovereign, you don't get sovereigns to sign treaties with you. they can't, because they have to recognize you as sovereign in the first placeI know, some people seem to think that treaties are the opposite of sovereignty. well, it's still wrong, however much they believe that(meanwhile, did you know that the UK has 2'000 treaties outside of the EU related ones? NATO, btw, is a treaty organization... of armed sovereigns, too. it's part of the acronym, see "T" for treaty and "O" for organization)

In reply to by medium giraffe