The talks between the United Kingdom and the European Union have reached a critical stage. There is less than a month to go until the end of the year, and if the final form of the Brexit agreement cannot be fine-tuned, the 27-nation bloc will join the United Kingdom like any third country from January.
Investors are also aware of this moment, sending the British pound to the monthly minimum against the dollar and the euro the day before the key negotiations began. The next 36 hours will be important for further development, during which the main negotiators of both parties – Michel Barnier for the European Union and David Frost for Great Britain – will meet.
The final decision on how EU-UK relations will be set up should be taken on 10th December. It can therefore be expected that until then the British pound will be under relatively great pressure and will probably weaken slightly. If the negotiations on the post-Brexit agreement failed, it would probably be the United Kingdom, which would be perceived by investors as the one who lost. And in that case, the pound could be expected to respond with an even greater decline, comparable to the one that followed the Brexit referendum.