The President of the European Council Donald Tusk has outlined his draft Brexit terms, stating that trade talks will not commence until significant progress has been made on divorce settlements. His position remains in line with other EU officials including the German Chancellor Angela Merkel, and has put dents in the UK’s plan for parallel trade talks.
Once, and only once we have achieved sufficient progress on the withdrawal, can we discuss the framework for our future relationship. Starting parallel talks will not happen.
– Donald Tusk, President of the European Council
Tusk’s tone was surprisingly upbeat and he remains committed to ensuring an orderly divorce, however, he has expressed the integrity of the EU will at the forefront of any future deal.
Sterling holds steady
The Pound remains stable following the guidelines, trading -0.10% down from the start of the trading session. GDP figures released this morning slightly disappointing, but investors can take comfort in the strong performance from the UK since the referendum.
The real test for the UK economy begins
In the mean time until negotiations begin, investors will be looking for important clues as to how the UK economy is performing now that Article 50 has been triggered.
Now the key agenda for Brexit has come to fruition, business and consumer sentiment will play a huge part in the future direction of the Pound. Next Monday Manufacturing PMI data will be released at 09:30, a key measure of how one of the UK’s largest export sectors is performing.
In the very short term, there may not be much downturn in the UK’s Manufacturing sector as the weaker Pound continues to cushion the impact of Brexit, but markets will be on full alert for any signs of weakness in the run up to the Article 50 deadline.
Data will be light for a good portion of the week for the UK, but tune your eyes to Friday’s Manufacturing Production and NIESR GDP estimates for key insights into how the UK economy performed in the run up to Article 50.