The announcement from the EU27 is now expected on Monday or Tuesday as the situation was left in flux after the developments in parliament. Before the Prime Minister announced his ultimatum, the bloc seemed likely to offer the UK a three-month delay with an option to leave earlier if the deal is agreed in parliament.
The three-month delay still remains the most likely outcome despite arguments from France’s Emmanuel Macron that a shorter delay would be more appropriate.
Speaking about this, an anonymous senior EU diplomat stated: “We don’t want to be dragged into British politics and this is what was requested. They can leave earlier if they ratify a deal. To echo your prime minister, we just want Brexit done.”
Looking ahead to next week, it is likely the pound will remain under pressure as Boris Johnson awaits the decision of the European Union.
If the bloc offers a three-month extension, causing Mr Johnson to push for an early general election, it will likely cause Sterling to fall as Brexit uncertainty intensifies.
On Friday, data showed that German consumers grew more cautious as November’s GfK consumer confidence fell as trade woes and Brexit uncertainty pushed the manufacturing sector into recession.
The index fell to its lowest level since November 2016 and the bloc’s largest economy is expected to fall into a recession during Q3 as the country has largely been dependent on consumption and state spending.
The expectations index did show improvement however, rising from 90.8 to 91.0.
Commenting on this morning’s data from Ifo, ING’s Carsten Brzeski noted: “Relief, unfortunately, is not the same as a rebound. However, after endless disappointing macro data out of Germany, today’s Ifo reading gives hope that at least a bottoming out could be in sight. Still, the risk of a long flirt with stagnation remains high and with it the risk of a Japanification of the German economy.
“A bittersweet victory against a real recession, as such a stagnation would give the comfort of avoiding a severe crisis, while at the same time reducing the urgency to add.”