The pound had a volatile day on Wednesday as it first made gains on the hopes of a breakthrough with the EU withdrawal agreement, but these were later dashed, and the pound quickly lost ground again. At one point, Sterling had gained 0.5% against the US dollar as there were rumours Brussels would offer a compromise on the controversial Irish backstop arrangement.
The pound ended up trading slightly lower on the day and was down 0.1% against the euro. Investors are quite clear in their position that any breakthrough on a deal is extremely unlikely. However, Boris Johnson has promised that the next Conservative Party election manifesto would aim to avoid a no-deal Brexit. Most political analysts still believe that once an extension is requested, an election will be called for near the end of November.
GBPUSD opened at 1.2227 and climbed to a high of 1.2260 very quickly before falling back down again. The pair was stable for the rest of the day before dipping slightly to close at 1.2202
GBPEUR opened at 1.1141 and followed a similar pattern, a brief high of 1.1153 before dropping back down and steadily declining across the rest of the day to close at 1.1120
The dollar rose to a one-week high against the safe-haven Japanese yen on Wednesday as investors saw signs of a resolution to the US-China trade war. Despite recent tensions regarding the treatment of Chinese Muslim minorities leading to Chinese companies being blacklisted, Beijing has maintained that a partial agreement is still possible.
The dollar gained 0.3% against the Swiss franc but the dollar index was overall flat on the day. Federal Reserve policymakers are still divided as to whether interest rate cuts are needed going forward according to the minutes of the bank’s last policy meeting.
EURUSD made strong gains in early trading to open at 1.0980 but then gently declined across the rest of the day to close at 1.0975
