Market Update

Sterling fell further this morning and implied volatility surged as markets increasingly price the risk of the UK crashing out of the European Union at the end of the month with no trading arrangements in place.

Prime Minister Boris Johnson said there was “a strong possibility” Britain and the EU would fail to strike a new deal but vowed to do whatever he could to avoid a tumultuous split.

European Commission President Ursula von der Leyen told the 27 national EU leaders meeting in Brussels a no-deal split in trading ties with Britain at the end of the year was now more likely than not, an official said.

Von der Leyen spoke for less than 10 minutes about Brexit as EU leaders started their second day of talks, having spent the whole night haggling over raising the bloc’s ambition on fighting climate.

“Situation is difficult. Main obstacles remain,” the EU official said of the message shared with the leaders by von der Leyen, who heads the EU’s executive European Commission, which is negotiating with Britain on Brexit for the whole bloc.

“The probability of a no deal is higher than of a deal,” the official said. “To be seen by Sunday whether a deal is possible.”

The person, who spoke on condition of anonymity, also said there was progress in implementing the earlier EU-UK divorce agreement with provisions for the sensitive Irish border.

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