Sterling dives as Brexit talks hang in the balance

FAN Editor

A lorry passes through security at the Port of Larne in Co Antrim, Northern Ireland on December 6, 2020.

PAUL FAITH | AFP | Getty Images

LONDON — Sterling extended losses against the U.S. dollar on Monday, amid escalating fears that U.K. and EU negotiators will fail to reach a deal before a transition period ends later this month.

The U.K. currency traded at $1.3230 during morning deals, down 1.5% for the session.

Talks between the U.K. and European Union are ongoing in Brussels, but both sides remain divided over three complicated issues: fisheries, competition rules and governance of their potential deal. They have been stuck on these three areas since early in the summer.

Media reports over the weekend pointed to a compromise over fishing rights, but at a meeting on Monday morning, the EU’s chief negotiator Michel Barnier denied that was the case.

Barnier told EU ambassadors that a deal is still possible, though he could not guarantee whether it would happen Monday, an EU source, who did not want to be named due to the sensitivity of the talks, told CNBC.

The U.K. left the European Union in January but agreed to follow EU trade rules until the end of the year so both sides could establish new trade arrangements. However, negotiations have dragged on for months and as the end of the transition period approaches, there are growing concerns that talks could collapse without a deal.

Simon Coveney, the Irish foreign affairs minister, told the Irish Times on Sunday that he would not be shocked if talks were to fall apart.

In this scenario, exporters on both sides would face higher costs and barriers in their day-to-day business.

Speaking to reporters in Brussels, Coveney added that Barnier had sounded “very cautious about a deal being achieved” on Monday.

“At the moment these negotiations seem stalled and the barriers to progress are still very much in place,” he said.

The latest push to get a deal comes after the two negotiators halted talks on Friday, citing “significant divergences.”

However, U.K. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen instructed their teams to give it another go after a phone call on Saturday. The two leaders will speak again on Monday evening.

Even if both sides strike a deal in the coming days, they have yet to overcome a dispute about their previous commitments. The U.K. government has put forward legislation, which, if approved, would override parts of the Withdrawal Agreement — a deal they both approved earlier this year and paved the way for the U.K.’s official departure in January.

The EU has said it will not greenlight any new trade arrangements before the U.K. governments changes this position to fully comply with their previous accord.

Michael Gove, a member of the U.K. government, is meeting Maros Sefcovic, the vice president of the European Commission, in Brussels on Monday. This meeting could shed a light about whether the current impasse can be overcome.

— CNBC’s Sam Meredith contributed to this report.

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