LONDON – The British pound jumped close to a level not seen on Thursday for 31 months as investors bet the UK and the European Union that a long-awaited Brexit trade deal would take place.
Sterling climbed 0.8% to almost $ 1.3593, after first reaching a season high of $ 1.3616. Earlier this month, the currency broke the 2020 high of $ 1.3624, a level that has not been a hit since May 2018.
Brexit negotiators from both sides are set for a narrow free trade agreement on Thursday. This comes after several months of political conflict over several key sticking points.
“This is going to be a slim deal,” Jane Foley, head of FX strategy at Rabbonk told CNBC Thursday. “The general feeling is that services are being left out in the cold and negotiations will continue next year.”
Irish Foreign Minister Simon Coveney said the post-Brexit deal was expected on Thursday, delaying an announcement after a “last-minute bottleneck”.
The timing is unclear with Reuters in mid-London time, citing both EU and UK officials, saying the deal could still be “overcome”. The press conference was initially delayed on Thursday, as both sides finalized a “short text” of an agreement on fishing rights.
The ratification of an agreement would wrap up an extensive period of tense negotiations over future trade relations between Britain and the European Union. Both sides are not concerned with many major issues, but at least fisheries.
The European Union wants to maintain access to UK waters for its fishing fleet, while the UK wants to curb these fishing rights to a large extent. A no-deal scenario could see the EU’s access to Britain’s waters abruptly, and vice versa, and Britain also threatened to deploy forces to protect British waters.
Eager for next year, Bernburg senior economist Kallum Pickering said a deal would offer support for the pound.
“By eliminating a major downside risk to the UK economy in both the near term and long term, a deal will unlock significant investment in the UK and support recovery once the ongoing coronavirus shock is overcome, as well as a positive Will provide the background. Title for UK Equity and Sterling in 2021, “he said in a note on Thursday.