LONDON – The British pound jumped close to levels not seen 31 months ago on Thursday, with investors betting that the UK and the European Union would make a long-awaited Brexit trade deal.
The pound sterling rose 0.8% to around $ 1.3593, after previously reaching a session high of $ 1.3616. Earlier this month, the currency surpassed the $ 1.3624 high in 2020, a level it has not reached since May 2018.
Brexit negotiators on both sides are about to close a narrow free trade agreement on Thursday. It comes after months of tense political disputes over a number of critical points.
“This will be a weak business,” Jane Foley, head of FX strategy at Rabobank, told CNBC on Thursday. “The general feeling is that services will be left out and negotiations will continue next year.”
Irish Foreign Minister Simon Coveney said a post-Brexit trade deal was expected on Thursday after a “last-minute hurdle” delayed an announcement.
Times are not yet clear, with Reuters at noon, London time, quoting an EU and UK official saying the deal could still take “hours to happen”. Press conferences scheduled for Thursday were postponed because both sides finalized the “short text” of an agreement on fishing rights, said Coveney.
The confirmation of an agreement would end an extensive period of tense negotiations on the future trade relationship between Britain and the EU. Both sides are at odds over a number of important issues, mainly fishing.
The EU wishes to maintain access to the waters of the United Kingdom for its fishing fleets, while the United Kingdom wishes to largely restrict these fishing rights. A no-deal scenario could see the EU’s access to UK waters end abruptly, and vice versa, and the UK has even threatened to send military personnel to protect British waters.
Looking ahead to next year, Berenberg senior economist Kallum Pickering said that a deal would support the pound.
“By removing a major downside risk for the UK economy, both in the short and long term, an agreement would unlock significant investment in the UK and support recovery as soon as the ongoing coronavirus shock begins to subside, in addition to provide a positive outlook for UK stocks and pounds sterling in 2021, “he said in a note on Thursday.