Sterling at 19-day high vs euro as traders see hope of avoiding cliff-edge Brexit
- 28 Sep 2020
The British pound rose to a 19-day high versus the euro and gained 0.7% against the US dollar on Monday on hopes that Britain could secure a Brexit trade deal with the European Union by October or at least avoid a cliff-edge exit from the bloc.
Sterling was 0.6% higher against the euro at 90.70 pence by 0840 GMT, its highest since Sept. 9. Against the dollar it was at its highest since Sept. 22 at $1.2830.
A final agreement must be reached by the end of December but both sides have set a preliminary deadline for next month as it would take some time to sign off any deal.
The Bank of England and the European Union's securities watchdog said on Monday they have agreed on the information-sharing arrangements needed for the bloc's banks to continue using clearing houses in London from January.
"There's hope that no matter what they will avoid the extremes and even if there is no deal, they will make sure that we don't get any disruptions in the market," said Athanasios Vamvakidis, global head of G10 FX strategy at BAML.
"Just a couple of weeks ago, everything was falling apart. There was the internal market bill and the chances for a deal had collapsed," said Vamvakidis.
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"And since then it seems that the UK government...have indicated that they will avoid violating the withdrawal agreement so this was one positive," he said, adding that last week there was also some progress in the negotiations.
The internal market bill had raised worries that Britain was on course to override the withdrawal agreement signed last year which protected the border between Ireland and Northern Ireland, an issue at the heart of last year's Brexit negotiations.
Still, Britain on Friday said there was still a lot of work to do in talks with the EU on a trade deal and called on the EU to translate a "more constructive attitude" into realistic policy positions.
Britain continues to struggle with a rise in coronavirus infections, recording 5,693 new cases on Sunday.
The British government is mulling tougher restrictions in England to tackle the swiftly accelerating second wave of the novel coronavirus outbreak.
A coronavirus-induced economic recession in the UK has market watchers questioning whether Britain will cut its interest rate below zero.
The Bank of England's investigation into whether negative rates might help the British economy through its current downturn has found "encouraging" evidence, policymaker Silvana Tenreyro said in an interview published late on Saturday.
Reuters
