Left Menu
Development News Edition

Sterling heads higher on hopes of a Brexit trade deal

Not everyone is convinced the pound will move much higher if a trade deal is secured. "The UK is likely to face adjustment pressures from the twin factors of COVID-19 and Brexit with or without a limited FTA (Free Trade Agreement) in place from January 1, 2021, and there is scope for more friction in the bilateral UK/EU relationship going forward," said Stephen Gallo, European Head of FX Strategy at BMO Capital Markets.

Reuters | London | Updated: 30-11-2020 22:34 IST | Created: 30-11-2020 22:22 IST
Sterling heads higher on hopes of a Brexit trade deal
Representative Image Image Credit: ANI

Sterling gained on Monday as traders clung to hopes that Britain and the European Union will soon seal a long-awaited Brexit trade deal. The United Kingdom exits the EU's orbit on Dec. 31, when a transition period of informal membership ends following its formal departure last January.

The sides are trying to secure a deal to govern nearly $1 trillion in annual trade from Jan. 1 but are yet to bridge differences on fishing, state aid and how to resolve any future disputes. British Environment Secretary George Eustice said the coming week was "crucial" for securing a breakthrough in talks, and both sides said time was running out for a deal. German Chancellor Angela Merkel said some EU member states were becoming impatient.

Even so, most sterling investors are confident the two sides will eventually agree a deal. The pound has held on to recent gains and last week hit a 2-1/2 month high. On Monday, the British currency rose to as high as $1.3388 before falling back to trade at $1.3335 in late London trading, 0.1% higher on the session. Above $1.34 would mark a three-month high.

Against the euro, the pound extended its earlier rise as the single currency suffered a broad selloff. The euro was last down 0.3% versus sterling at 89.585 pence. Not everyone is convinced the pound will move much higher if a trade deal is secured.

"The UK is likely to face adjustment pressures from the twin factors of COVID-19 and Brexit with or without a limited FTA (Free Trade Agreement) in place from January 1, 2021, and there is scope for more friction in the bilateral UK/EU relationship going forward," said Stephen Gallo, European Head of FX Strategy at BMO Capital Markets. Gallo has a one- and three-month target of $1.34.

"Regardless, the UK's twin fiscal and current-account deficits will probably curb GBP appreciation for the time being, and their persistence could pose medium-term inflation risks to the UK economy," he added. Commerzbank's Ulrich Leuchtmann noted that pricing in the options market suggested significant demand for insuring against falls in the pound. Leuchtmann does not expect much of a rise in sterling even if a deal is announced.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


TRENDING

OPINION / BLOG / INTERVIEW

China: A savior for emerging markets or a poison pill?

... ...

Future of Urban Planning: Artificial Intelligence guiding the way

Advances in emerging technologies like Artificial Intelligence and Machine Learning can help us understand our cities better and derive useful insights from real-time data collected through automated models....

Videos

Latest News

I came here to play: Telles keen for more chances at Man Utd

Brazilian defender Alex Telles said he moved to Manchester United to play but heaped praise for teammate Luke Shaw and stressed how their competition for the left-back position is helping everybody. Telles joined the club from FC Porto last...

Ozil's creativity led to many goals for Arsenal: Arteta

Arsenal coach Mikel Arteta on Sunday said that Mesut Ozils creativity brought about many goals for the Gunners. Artetas remark came as Ozil completed a transfer from Arsenal to join Turkish club Fenerbahce FC.Mesuts achievements at Arsenal ...

Highlights

Following are the top stories at 9 pm NATION DEL31 PM-YOUTHS PM exhorts youths to defeat network of lies and rumours on COVID-19 vaccination with right information New Delhi Prime Minister Narendra Modi on Sunday said Indian scientists have...

Varun Dhawan's fan arrives at wedding venue with handmade gift

On the occasion of Bollywood actor Varun Dhawan and his long-time girlfriend Natasha Dalals marriage, a fan arrived outside the wedding venue to gift the star some handmade sketches made by him. Speaking to ANI, the person introduced himsel...

Give Feedback