While Boris Johnson may have once again insisted that the UK will “prosper mightily” in the event of a no-deal Brexit, the scramble to secure a last-minute trade agreement strongly suggests otherwise.
In fact, many people consider this to be little more than posturing, as both sides continue to talk tough as the negotiations persist through the festive period. Interestingly, some commentators remain sure that a deal will be reached at the last minute, although this will require some form of compromise on one or both sides.
But how confident are the markets that a Brexit deal will be reached, and could the next week or so have in store ahead of December 31st?
How are the Markets Faring So Far?
We have been trapped in the so-called “eleventh hour” of Brexit trades for what seems like years now, with various markets, industries and financial assets continuing to bear the considerable brunt of this.
However, we really have reached the final stage of negotiations in the Brexit conundrum, with the next few days likely to represent make or break for the chances of securing a viable free trade agreement.
The markets certainly remain sensitive to such the precarious nature of these talks, as they continue to move in line with new updates and announcements as they’re released into the public domain.
For example, it was recently suggested that both the EU and the UK had made concessions on their respective fishing rights chances, with the former apparently accepting a 25% reduction in their total waters’ catch.
This triggered a pronounced rally for the FTSE 100, which subsequently fell completely flat and closed two points (0.0%) lower at 6,415 by the end of the day in question.
This type of volatility has also been felt by the pound and similar assets, with prices continuing to fluctuate on a daily basis (albeit within a relatively limited range).
Are the Markets Confident of a Brexit Deal?
The latter point is quite insightful, as despite constant price movements across an array of asset classes, entities such as the FTSE 100 and the pound have continued to perform relatively robustly over the course of the last few weeks.
This suggests that the markets and their key drivers remain confident that a deal will be reached before December 31st, with the belief being that the value of trade between the two markets will ultimately prove more important than symbolic issues such as fishing waters, governance and the so-called “level playing field”.
Craig Erlam from the broker Oanda has certainly said that he’s confident of a deal being reached, highlighting the performance of the pound against the US dollar one of the most telling factors.
Make no mistake; the pound hit one-year highs against the greenback on Thursday last week, within a whisker of the coveted 1.35 barrier. Even more tellingly, it also made ground against the Euro, although there is some work for it to do if it intends to reach new highs against the single currency in the near-term.
Of course, some may argue that currency traders are slightly more care-free given their ability to profit even in a depreciating marketplace, but there’s no doubt that the markets as a whole are showcasing genuine signs of confidence as 2020 draws to a close.