The pound jumped to an eight-day high on Thursday after the head of the Eurosceptic group of MPs described the government’s latest Brexit proposal as “tolerable”. By the early afternoon the pound had gained 0.9% against the dollar and 0.6% against the euro. At this point it is still unclear whether these proposals will turn into a formal withdrawal agreement agreed by both the government and the EU.
The markets are currently sceptical that the latter criteria will be met. With many EU officials saying that these proposals are not the basis for an agreement. Both sides are now preparing either for a delay or a no-deal in 28 days’ time. Support for the pound based on a breakthrough with a deal will fade and the pound could well return to the lows seen in September around the $1.1959 mark.
GBPUSD opened at 1.2285 and made sharp gains in the afternoon, reaching a high of 1.2408 and settling to close at 1.2373
GBPEUR opened at 1.1225 and followed a similar pattern, reaching a high of 1.1293 and closing at 1.1264
The dollar hit a four-week low against the Japanese yen on Thursday as investors were concerned that the US economy was slowing down. Manufacturing data and service sector surveys have cast doubts about the theory that the worlds largest economy was more resilient than its global rivals. The dollar fell 0.3% against the yen and the dollar index fell 0.2%. Investors are awaiting today’s employment figures to either confirm or subside fears.
Analysts believe it is becoming increasingly difficult The Federal Reserve will take no action on interest rates, with the probability of a rate-cut this month jumping to 92.5% from 77% on Wednesday. Elsewhere, the euro gained 0.1% on the dollar.
EURUSD opened at 1.0944 and gained steadily across the day, closing at 1.0984