Brexit Bulletin: Juncker’s Hopes

Brexit is 41 days away.

(Bloomberg) --

Today in Brexit: Optimism surges for a Brexit deal after positive signals from Jean-Claude Juncker.

What’s Happening? European Commission President Jean-Claude Juncker sent pulses racing and the pound to its highest level in two months against the U.S. dollar when he said in an interview with Sky News that a Brexit deal could be reached by Oct. 31., the date the U.K.’s is currently scheduled to leave the European Union. “I think we can have a deal,” Juncker said, according to a report of the interview to be broadcast on Sunday. “I am doing everything to have a deal because I don’t like the idea of a no-deal because I think this would have catastrophic consequences for at least one year.”

The EU does not want  to be blamed for a no-deal Brexit. That’s one of the bloc’s biggest priorities now, and Juncker’s interview should be seen in that context. As soon as Boris Johnson became U.K. prime minister in the summer, EU officials noticed that the British government was starting to send signals that failure to reach an agreement would be the bloc’s fault. Juncker, who steps down himself on Oct. 31 after five years in the EU’s most powerful position, also has an eye on his legacy. That would be hit by a no-deal Brexit — especially if it was seen as being the result of European intransigence.

Despite the boost to sterling’s, Juncker doesn’t tell us much we didn’t already know. There is some hope of a deal. After all, the two sides are talking — something thought impossible barely a month ago. There is an emerging “landing-zone” of sorts that shifts elements of the contentious Irish border “backstop” mechanism to Northern Ireland rather than the whole of the U.K.

But they’re not there yet. Far from it in fact — and that’s why, amid the hope, there’s still a great deal of pessimism on both sides too. The U.K. handed documents to EU negotiators on Thursday, but they were “ideas” that went no further than issues that had already been discussed verbally, officials said. The EU doesn’t expect full proposals for changes to the Brexit deal until after the Conservative Party conference at the start of October.

Juncker said he doesn’t have “an erotic relation” to the backstop. That means, as EU officials have said for sometime, that alternatives are acceptable. But there’s the rub. Even here, Juncker makes it clear that any solution must have exactly the same effect, “allowing us and Britain to achieve the main objectives of the backstop — all of them.”

Can Boris Johnson make peace with that? Many are still doubtful.

Today’s Must-Reads

• Can the Port of Dover — through which a sixth of the U.K.’s trade in goods flows — cope with a no-deal Brexit? Alex Morales went to find out.  
• Former Federal Reserve policy maker Kevin Warsh, is a left-field option to replace Mark Carney at the Bank of England.
• Labour Leader Jeremy Corbyn finds himself in unfamiliar territory: the middle ground. Politico’s Charlie Cooper wonders how he got there.

Brexit in Brief

Japanese Interests | International Trade Secretary Liz Truss said at a meeting in Tokyo the U.K. is interested in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. At talks with Japanese Foreign Minister Toshimitsu Motegi, she said Britain also wants an ambitious trade deal with Japan and called for input from British companies on what a U.K.-Japan trade agreement should look like.

Pound Vulnerable | Sterling could tumble to parity with both the dollar and the euro if the U.K. crashes out of the EU without a deal, according to Shamik Dhar, chief economist at BNY Mellon Investment Management. “It’s pretty clear under no deal you’ll get a very big fall in sterling — I’d say 10% to 15% from here,” said Dhar, formerly of the Bank of England.

Bercow’s Confidence | House of Commons Speaker John Bercow said a no-deal Brexit isn’t an option if Parliament doesn’t agree, because the law says it cannot happen. At an event in Zurich honoring Winston Churchill, he said legislation passed this month “is not an aspiration, it is the law of the land.” Bercow said he’s not making Brexit predictions, branding anyone who tries “either an extraordinarily clever person or a reckless fool.”

All Rise | The U.K.’s Supreme Court will aim to announce its ruling on Boris Johnson’s suspension of Parliament “early next week,” President Brenda Hale said at the close of three days of hearings. “None of this is easy,” she said. “We will have to decide what the answer is and we will have to decide one way or the other what the consequences are.”

Exodus Warning | France’s top markets regulator said Brexit threatens to push derivatives away from Europe toward London and the U.S., and called for major changes to European rules to prevent an exodus. Robert Ophele, chairman of France’s Autorite des Marches Financiers, joins British regulators in calling for a solution that keeps markets moving.

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To contact the editor responsible for this story: Chris Kay at ckay5@bloomberg.net, Adam Blenford

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