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The British pound rose near its 2020 high on Wednesday morning as hopes rose in Westminster that a post-Brexit trade deal with the EU could be ready for approval before Christmas.
The pound was trading as high as $ 1,352 in London after British MPs were put on hold for a prolonged session of the House of Commons next week, which could provide an opportunity for lawmakers to scrutinize any deal.
In addition to rising investor expectations of a deal, the rise in the pound was helped by the widespread weakness of the US dollar.
European and Downing Street diplomats insist that negotiations remain stalled in crucial areas; a Boris Johnson ally said “there was certainly no breakthrough” and that a no-deal scenario was still the most likely outcome.
But in London and Brussels, the debate has focused on how any potential deal could receive parliamentary scrutiny before the end of Britain’s post-Brexit transition period on January 1. The betting markets put the prospect of a deal at more than 70%.
Some Euro-skeptical Conservative MPs have indicated that they could tolerate the deal taking shape. Jacob Rees-Mogg, leader of the House of Commons, is clearing the covers to legislate on the details of a deal at breakneck speed.
Mr Rees-Mogg has not tabled a “motion for recess,” suggesting that plans for Parliament to stand up for its Christmas break on Thursday have been scrapped.
“It is very likely that we will be sitting next week,” said a senior government official. Although MPs would like to debate a possible no-deal outcome next week, ministers hope the additional time will be used instead to legislate for a deal.
A British official said talks in Brussels last weekend had been “positive” and that progress had been made in solving the biggest outstanding problem: a new level playing field to ensure fair competition.
Eurosceptic MPs said they could accept what the EU calls “a rebalancing mechanism,” which would allow both sides to declare fault if they feel they are being unfairly undermined by regulations.
The mechanism would involve an arbitration panel to determine whether the damages caused by regulatory divergences were serious and to ensure that punitive sanctions were proportionate.
Some conservatives have called this a “freedom clause” because it would allow the UK to set its own regulatory course, albeit with the possibility of an orderly sanctions regime if the divergence becomes too great.
Andrea Leadsom, a former pro-Brexit cabinet minister, said she thought there would be a deal: “The key has always been to make sure any deal is fair to both parties and does not give one party absolute power and is a relationship between two sovereign bodies “.
John Hayes, a former minister who supported Brexit, said he also expected a deal “if the EU has removed its unilateral threat on a level playing field.” He said negotiators could then “move on to final issues like fishing.”
Rees-Mogg said Tuesday on a ConservativeHome podcast that ideally six days would elapse between the signing of an agreement and the passage of the law by the Queen, with one day for each of the debates in the Commons and the Lords. But he said the process could be “truncated.”
The events occurred when the European Parliament tried to pressure the European Commission to act quickly so that it had sufficient time to analyze any agreement in time for its ratification.
High-level MEPs worry that if negotiations drag on too close to Christmas, they won’t have enough time to examine the complex trade deal before endorsing it.
They expressed frustration at the slow progress in a call with the commission’s chairman, Ursula von der Leyen, on Monday, according to people familiar with the discussions.
Michel Barnier, the EU’s top Brexit negotiator, told ambassadors on Monday that a deal could be approved on time if it was reached within days. But he added that if the discussions drag on much longer, the two sides could be forced into a short-term no-deal scenario early in the new year before any trade deals can go into effect.
However, this would be a disturbing result that officials are eager to avoid. An alternative would be to take the agreement to a “provisional” application, according to which it will enter into force in time, subject to ratification by the European Parliament in the future, an EU official said.
But the commission and parliament are skeptical about that route because of the legal complications it entails.
Meanwhile, the UK Cabinet Office will carry out “Operation Capstone” on Wednesday to tackle various no-deal scenarios such as the disruption of the border.
A truck park designed to ease road congestion in Kent has been found not to be fully operational on January 1.
The Sevington site, with space to park 1,200 trucks, will not be ready for customs checks until February, authorities confirmed Tuesday. Instead, verifications will need to be done elsewhere in Ashford.
