The pound had a volatile day yesterday amid mixed reports of whether the UK and EU were imminently going to reach a Brexit deal. In the last week the pound surged 5% and in the late afternoon yesterday it was up 0.5% against the dollar.
Though it appears a deal has been reached between the EU and the UK this morning, causing the pound to hit highs not seen since May this year, the new hurdle will be to pass this deal through parliament. The DUP, whom the government would rely on for majority support and whom many Conservative MPs look to for guidance on whether to support the deal, have rejected the agreement in its current form.
Leaving Northern Ireland inside the customs union, subject to a review every four years has not been satisfactory due to uncertainty that remains around “customs and consent issues” as well as needing clarity on VAT. All eyes now turn once again to parliamentary arithmetic, with the support of the DUP a majority could possibly be found, but as it stands this deal is cannot pass through parliament without the unexpected support of opposition MPs.
GBPUSD opened at 1.2707 and though it was a volatile day, closed higher at 1.2851. This morning it has risen to 1.2953 on the back of news of the deal being agreed.
GBPEUR opened at 1.1513 and made gains throughout the day, closing at 1.1599. This morning it traded as high as 1.1633
The dollar fell on Wednesday as retail sales data highlighted weakness in the US economy and boosted the case for a rate reduction. The dollar index fell 0.3% with the dollar also falling 0.1% against its safe haven rival, the Japanese yen. Increased trade tensions have generally been supportive of the dollar as investors avoid risky assets.
Elsewhere, the Norwegian crown, sensitive to trade tensions as an oil exporter, hit a an 18-year low against the US dollar.
EURUSD opened at 1.1031 and made sharp gains across the day, closing near a high of 1.1080