Sterling continues to grow as the Brexit deal looms, the dollar continues to fall

AMSTERDAM (Reuters) – Sterling boosted profits on Thursday as Britain and the European Union came one step closer to concluding a trade deal, raising hopes that the UK could avoid a turbulent economic departure at the end of the year.

FILE PHOTO: Banknotes in pounds and US dollars can be seen in this illustration taken on January 6, 2020. REUTERS / Dado Ruvić / Illustration

The dollar has lagged behind in diluting the holidays, as hopes for an agreement that would protect about $ 1 trillion a year in multi-channel trade from tariffs and quotas have dampened demand for the safest assets.

The British pound increased profits and rose over 0.6% against the dollar in early London trade, to $ 1.3856, after the Irish foreign minister said an agreement was expected on Thursday, with fisheries in agreement in principle, but on the details are still being discussed.

Sterling also strengthened against the euro and last rose 0.3% to 89.90 pence.

Sources in London and Brussels said the deal was close as British Prime Minister Boris Johnson held a late-night conference call with his senior ministers and negotiators, reviewing trade legal texts.

Johnson and European Commission President Ursula von der Leyen are expected to hold a press conference later Thursday morning, the BBC reported.

“This time it really seems like an agreement will be reached in time for Christmas,” Westpac macro strategist Tim Riddell told clients.

He said Thursday’s deal could bring the pound to $ 1.40 – a level it hasn’t broken since 2018 – but added: “The potential for a significant shift to 1.4500 now seems unlikely given how exhausted the position is. so widespread. “

Headlines about Brexit overshadowed US President Donald Trump’s request for changes to the coronavirus aid law, which actually threatened to shut down the government next week.

The safe dollar slipped further towards a basket of currencies on Thursday, falling 0.3% to 90,188 after falling 0.3% on Wednesday. The euro strengthened 0.2% to $ 1.22055

The risk appetite supported other trade-sensitive currencies, with the Australian dollar rising as much as 0.3% against the dollar to 76.03 US cents after a 0.8% jump in the previous session.

The dollar also slipped 0.2% to 6.5185 Chinese yuan in the overseas market.

“Republicans and Democrats who agreed on the deal are positive news, and now the delay gives you the wrong option to get more – the bill for (incentives) is unlikely to be worse,” said Lauri Halikka, a fixed-income and foreign exchange strategist at SEB. in Stockholm.

“So, short-term uncertainty is probably compensated by the chance to get a bigger bill. Next, Biden becomes solemn in less than a month, so the delay probably won’t be longer than the one at worst. “

The dollar index lost more than 6% this year as investors bet that the US Federal Reserve will keep its monetary policy ultra-flexible and the fiscal stimulus will accelerate the economic recovery in 2021. Expectations for a further fall in the dollar help float stock markets and emerging currencies .

Even if the deal is not approved, and the dollar will benefit from a secure purchase in the short term, it will continue to weaken to $ 1.23 per euro during 2021, according to Jane Foley, head of foreign exchange strategy at Rabobank.

The yen, another safe haven currency, fell about 0.1% to 103.615 per dollar.

Japan Bank Governor Haruhiko Kuroda said on Thursday that the central bank is ready to take new steps to make its massive monetary easing more efficient and sustainable.

(This story corrects the title in the third paragraph of the Irish Foreign Minister, not the Prime Minister)

Report by Yoruk Bahceli of Amsterdam; Additional reporting by Kevin Buckland in Tokyo; Editing Pravin Char