LONDON – The British pound jumped close to levels not seen for 31 months on Thursday as investors opted for the UK and the European Union would reach a long-awaited Brexit trade deal.
The pound rose 0.8% to $ 1.3593, after previously reaching a session high of $ 1.3616. Earlier this month, the currency hit a high of $ 1.3624 in 2020, a level it has not reached since May 2018.
Brexit negotiators on both sides are said to be on the cusp of reaching a narrow free trade agreement on Thursday. It comes after months of tense political dispute over several key points.
“It will be a thin deal,” Jane Foley, head of Rabobank’s foreign exchange strategy, told CNBC on Thursday. “The general feeling is that services will stay out of the cold and talks will continue next year.”
Irish Foreign Minister Simon Coveney said a post-Brexit trade deal was expected on Thursday after a “last-minute hitch” delayed the announcement.
Schedules are unclear, with Reuters at noon, London time, citing an EU and UK official who says the deal could still be “on time”. Press conferences scheduled for early Thursday were delayed as both sides finalized the “small text” of an agreement on fishing rights, Coveney said.
Confirmation of an agreement would end an extensive period of tense negotiations on the future trade relationship between Britain and the EU. Both sides have disagreed on several key issues, especially in the fisheries sector.
The EU wants to maintain access to UK waters for its fishing fleets, while the UK wants to curb these fishing rights to a large extent. A scenario without agreement could cause EU access to UK waters to end abruptly, and vice versa, and even the UK had threatened to deploy the army to protect British waters.
Looking ahead to next year, Kallum Pickering, Berenberg’s senior economist, said a deal would support the pound.
“By eliminating a significant negative risk to the UK economy in both the short and long term, an agreement would unblock significant investment in the UK and support the recovery once the ongoing coronavirus shock begins to disappear. , in addition to providing a positive backdrop for UK stocks and the pound sterling by 2021, ”it said in a note on Thursday.