Pound continues ascent on Brexit deal hopes

Kumutha Ramanathan
·Contributor
·2 min read
Negotiation of Great Britain and European Union (Brexit). Statesman or politicians with clasped hands.
The pound has been rising on news that Brexit deal can be done. Photo: Getty

The pound has gained for a second day in a row on Tuesday, following a positive streak that began on news of a Brexit deal being within grasp.

The cable rate (GBPUSD=X) was up 0.2% at around 11:30am in London. While it had some momentary dips, it had almost hit near three-month highs at $1.34 before paring gains.

Though the pound touched its highest levels all week, its momentum slowed against the euro (GBPEUR=X) somewhat, and was down 0.2%.

Still, sterling continues to “hug the bullish channel,” said Neil Wilson, chief market analyst at Markets.com in a note on Tuesday.

“The outline of a deal is likely to emerge in the next few days,” he added.

Sterling started its ascent yesterday against the euro and dollar in London following a report in the Telegraph suggesting Johnson will this week make a “significant” intervention.

Sterling flirted with three month highs early this week as news of a possible Brexit deal continues to strengthen the currency.
Sterling flirted with three month highs early this week as news of a possible Brexit deal continues to strengthen the currency.

On Monday via Twitter, EU’s chief negotiator Michel Barnier said that “after technical discussions this weekend, negotiations continue online today with David Frost and our teams. Time is short. Fundamental divergences still remain, but we are continuing to work hard for a deal.”

READ MORE: Pound rises as Boris Johnson plans 'significant' Brexit intervention

“There are several permutations – a skinny deal, an incomplete deal with partial extension of the transition to allow finer details to be worked out next year, or a complete and comprehensive trade package,” said Wilson.

“The last of those would be the most positive for the pound, however I fear it will be a more nuanced package and one that still leaves the UK with a number of non-tariff type barriers that weighs on demand for sterling. Remember no deal is not an end state, though of course it would entail significant disruption in the New Year.”

The outlook for sterling in the short-term looks bright, added Marshall Gittler, head of investment research at BDSwiss Group.

With regards to Monday’s gains, he said he “expected the combination of the good PMIs, the good news on the vaccine front, and a firm end-date for the lockdown to push GBP up even more.”

“I think the pound could continue the gains next month, depending of course on how the Brexit talks go,” he added.

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