Despite disbelief in Europe, May and her team still publicly insist they can complete all the trade negotiations before Brexit day and have a new trading relationship ready to sign into law the moment the country leaves the bloc. Brexit Secretary David Davis has admitted that he’ll be in a weak position trying to negotiate a trade deal when the U.K. is already outside the bloc.

In order to meet the March 2019 deadline, the framework of the future relationship needs to be done ideally by October, to allow the European Parliament and the increasingly assertive U.K. lawmakers to have time to ratify the agreement. That leaves seven months to finalize the outline of an ambitious pact.

A senior EU official, speaking on Friday on condition of anonymity, said the full trade agreement will take years. The U.K. government underestimates the complexity of the trade discussions, the official said. He said that alongside the withdrawal agreement the two sides will issue a joint declaration outlining the principles of the future relationship to be worked on when the U.K. is no longer a member state.

One major obstacle is that neither side yet knows what it wants the future relationship to look like. May has not even discussed the matter in any depth with her own cabinet ministers. She’ll call them to a meeting next Tuesday to hear their views on the end state, according to her office. It’s unlikely to be the last time they talk about it.

Eoin Treacy's view

The EU was easily able to come up with three things it wanted right away following the UK’s decision to quit the group. It needed money, citizen rights and to settle the Irish border issue. The question of where each individual Eurozone country sees its best advantage from Brexit is going to be a much more difficult issue to overcome on a cohesive basis. When EU officials state that negotiations are going to be much more complex than the UK thinks, they are probably referring to the issues they have internally to come with a united front. 

There is no way the UK can have both maximum freedom to negotiate additional trade agreements and also have unfettered access to the Eurozone. Therefore, the result of negotiations is going to be somewhere in the middle. A lot of work has already been done since the two blocs already have harmony on trade. The questions will likely focus on financial services and aeronautics which are priorities for the UK. Automotive is probably where the greatest risk resides since that is a national priority for a number of Eurozone countries not least Germany.

The Pound pared its decline against the Euro today but will need to sustain a move above €1.14 to signal a return to demand dominance. 

Against the Dollar it has held a progression of higher reaction lows for more than a year and the most recent is in the region of $1.30.