No imminent breakthrough is expected from the summit this week
Theresa May will be in Brussels today and will be addressing European leaders before the pre-summit dinner is scheduled to take place. Despite her appearance, any hopes of a Brexit deal breakthrough is as low as it has ever been in recent weeks.
Talks stalled over the weekend between UK Brexit secretary Dominic Raab and EU chief Brexit negotiator Michel Barnier, and that is what led to the standstill we're seeing now between the two parties.
If there isn't going to be significant progress from the summit this week, then why is it important? Well, the issue here is all about sentiment and more specifically, deadlines.
In the middle of this year, October was touted to be the date where a deal should come to fruition but around September that timeline was pushed back to November instead. However, there is no official summit taking place in November between European leaders so any extraordinary meeting will likely have to be decided today or in the weeks to come - depending on whether or not there is any progress in negotiations.
If there isn't any viable proposal by Theresa May to come today, chances are European leaders will be convinced that there isn't enough time to reach a common ground by November and that effectively kicks the can down the road to December instead.
The EU has already hinted at that possibility yesterday with Barnier adding towards that rhetoric later in the day too. And should the can be kicked down the road, it won't bode well for pound sentiment as that means that the impasse seen is much harder to resolve and there's a very real possibility that there won't be a deal at the end of the day.
There's even talks now that the EU will hold a summit in November but it will be one to discuss in further detail preparations of a no-deal outcome instead. And the more this kind of rhetoric plays out in the days/weeks ahead, the more it will weigh on the pound and drag it lower. In short, today's discussions aren't about finding a breakthrough, it's merely about setting the tone for what is to come.
