UK Prime Minister Theresa May is heading to Brussels in an effort to unblock Brexit talks. The acrimony between her Brexit Minister David Davis and the chief EU negotiator Michel Barnier was clear last week. Barnier said the talks reached a deadlock.
May will be joined by Davis and Barnier will be joined by Jean-Claude Junker. They will try to reach some kind of arrangement to reignite the talks.
GBP/USD is trading slightly higher, flirting with the 1.33 level. Further resistance is at 1.3370.
Pound/dollar had a roller-coaster day on Thursday last week. The news about the deadlock sent the pound lower but this did not last too long. Later that day, the German financial paper Handelsblatt reported that the EU will offer the UK a two-year transition deal. Under this deal, the UK will basically remain in the EU until 2021 but will not have voting rights. This sent the pair higher.
Will May’s visit trigger a breakthrough? It’s hard to see that coming unless she offers a generous “divorce bill” payment. The EU forced the UK to agree to the sequence: first, discuss the details of the exit before talking about the future. This is similar to EU tactics in the past. The EU is treating the UK like Greece.
