The long-awaited talks to end all (Brexit) talks failed to provide a breakthrough after last night’s high-level dinner meeting between PM Johnson and European Commission President von der Leyen. ‘Very large gaps remain between the two sides’ and a final Sunday deadline has been set for a ‘firm decision’ on any potential deal.

Sterling has tumbled 0.7% with EUR/GBP pushing above 0.91 earlier in the session.

The UK’s currency has been buffeted by political developments over the past few days as traders try and work out if even a ‘lite’ deal can be agreed. The optimists hope that the two sides negotiation teams can still get to this point and that the new deadline might be extended if the UK and EU are close to agreement. But hopes are certainly fading as this would need to be ready to verify by the EU Council before the end of the month. Betting markets now have no-deal chances at 53%.

At least agreement is largely expected at the EU Summit with approval of the EU budget and recovery fund, after Poland and Hungary agreed a compromise with Germany. As for the ECB meeting shortly, President Lagarde has already pre-committed to easing which will likely be seen with more bond buying and an extension of bank loans. This probably won’t be enough to push EUR/USD lower and outweigh the bearish USD forces currently in play.

EURGBP pushes north

The trade weighted EUR is close to its four-month average which is important to note for the ECB watchers who may be disappointed by any lack of jawboning by the ECB today. But Brexit is driving EURGBP higher and prices are now trading above the 50% retracement level from the March highs and lows earlier this year.

If the pair can hold above 0.91, then bullish momentum can push prices towards 0.9161 which is the next major Fib level.