Good morning,

Yesterday, the EU laid down its first counter to Johnson’s “Global Britain” dream, by seeking to curtail the ambitions of a possibly heavily deregulated City of London post-2020.

When the news broke, sterling promptly dropped 0.50% against the Euro and 0.75% against the dollar, submitting most of the recovery gains mentioned in yesterday’s article. The fact of the matter for Britain, and the pound by extension, is that the fortunes of the critical financial sector need to be protected during negotiations for any post-Brexit ‘dream’ to be realised as reality.

As the EU well know, having a tax haven on the shores of Europe is the absolute last thing they can afford; by contrast, the UK know that as some 80.2% of its economy is wrapped up in services, it too cannot afford for it to falter.  Whilst trade talks will be scrutinised by the FX markets over the course of 2020, headlines such as these will draw the real focus, simply as such a disproportionate amount of the UK’s GDP is derived from the City of London’s financial services output.

Although we are only on day six of the negotiations, the situation is already getting serious for the UK’s negotiators. It is widely expected that Britain will focus on pushing through a services agreement in 2020 and leave the rest to additional talks down the line. Of course, this notion hinges on the EU’s complicity, and seeing as this looks to be rebuffed and reinforced with the imposition of ever-tighter EU regulation, it is hard to see a middle ground: as both sides want the exact opposite outcome.

Have a great day,

Author: Joshua Haden-Jones, Senior Relationship Manager


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