Brexit Finally Arrives, Johnson Says It's 'A New Dawn'

The United Kingdom will officially leave the European Union on Friday at 6 p.m. Eastern time, as Prime Minister Boris Johnson promises Brits a "new dawn."

The Brexit process follows more than three years of political wrangling.

The pound sterling is showing very little movement despite the momentous event, although fluctuations are expected.

Investors in the sterling rejoiced Thursday after the Bank of England issued its long-awaited interest rate decision, holding the rate at 0.75%. The GBP rose slightly in support. The GBP/USD exchange rate passed 1.31 during Friday's trading session.

The UK Times newspaper reported Johnson wants a "Canada-style" trade deal with the EU. The Canada-Europe trade agreement has eliminated 98% of the tariffs between Canada and the EU. Johnson is allegedly prepared to accept an "off-the-shelf" model.

"Nothing changes on Friday – although much of UK employment law derives from EU law, EU law will continue to apply during the transition period which ends on 31 December 2020,” said Bob Cordran, a partner at the international law firm Dorsey & Whitney in its London office.

“This could, in theory, be extended, but that is unlikely to happen – not least because the European Union (Withdrawal Agreement) Act 2020 prohibits it."

After the end of the transition period, the UK is, in theory, free to change its employment laws, he said. 

“However, this freedom may well be curtailed in the trade agreement which is to be negotiated with the EU. The EU wants 'regulatory alignment,' which would prevent the UK from deviating from its EU-derived legal standards, but the UK Government says that it will not agree to this. Time will tell."

The iShares MSCI United Kingdom Index EWU was down 1.64% at the time of publication Friday, while the Vanguard FTSE Europe ETF VGK was down 1.58%.

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