For the past four months, the U.K. has been negotiating with itself. Ferocious political debates over whether to go for a soft Brexit or a hard Brexit, whether and what concessions the U.K. might offer the EU to protect the City, and what role parliament should play have sent the pound down and gilt yields up—and all this before any substantive discussion with the European Union itself has taken place. But as U.K. Prime Minister Theresa May heads for her first EU-leader summit in Brussels, it is becoming clear that when real negotiations begin, they are likely to be even more acrimonious than the current phony war.

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