EU counteracts British internal market law: Pound under pressure – VP Bank column

In the Brexit dispute, the European Union is now taking legal action against Great Britain for violating the EU Withdrawal Treaty. Commission President Ursula von der Leyen announced this today. The British Internal Market Act undermines parts of the withdrawal agreement that is already in force. The EU Commission had given Boris Johnson an ultimatum until Wednesday to withdraw the controversial clauses of the law.

Since London let the deadline pass, an official report was filed. The EU Commission sees a breach of contract. The UK government now has a month to comment. In the end, the European Court of Justice may have to decide.

Brussels and London are now fighting hard. The negotiating climate is poisoned. It remains more than questionable whether an agreement on a free trade agreement between the EU and Great Britain will be reached by the end of the year. There is still a transition period until the end of the year, during which the island economy will continue to have access to the European internal market.

We are still of the opinion that the United Kingdom will continue to have access to the European internal market in the future. That would be the most economically rational decision for both sides of the English Channel. But Boris Johnson as a person makes us doubt whether a follow-up agreement with the EU is actually desired. The Prime Minister’s decisions often seem abrupt and uncontrollable. It is not uncommon for him to reverse the decisions made within a short period of time.

One thing is certain: the closer the year comes, the more heated the mood becomes. Neither side wants to buckle prematurely. So it comes down to a last-minute decision again. The escalation will therefore increase in the coming weeks.

This is not good news for the British pound. Following today’s Brussels decision, the British currency fell against both the US dollar and the euro.

If there is an amicable agreement between the EU and Great Britain at the end of the year, the pound could start a fireworks display. A hard Brexit, on the other hand, would have negative consequences not only for the pound, but also for the euro. Both currencies would then have to post significant losses against the dollar. In view of the expected greater economic damage to Great Britain in relation to the EU, the British currency would give way more significantly. The preprogrammed difficult negotiations between London and Brussels will initially lead to the pound going up and down in the autumn months.

Disclaimer: This text is a column of the VP Bank. 4investors is not responsible for the content of the column and therefore does not necessarily have to agree with the opinion of the 4investors editorial team. Any liability and claims are therefore expressly excluded by 4investors!

At a glance – chart and news: British pound – currency

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