The pound hit a 5-month high on Tuesday following a report that the EU was very close to agreeing to a withdrawal deal with the UK. Negotiators were hoping that an agreement would be reached at midnight last night, though this did not materialise. The pound was 1.34% higher against the euro and made similar gains against the dollar.
Today the UK and EU have entered the final day of negotiations before tomorrow’s crunch summit with both sides reporting progress being made towards agreeing a deal. If the deal is not ratified by the end of today then Prime Minister Boris Johnson will be forced to ask for an extension, though some still doubt he will do this. Lawmakers are yet to confirm whether they will sit on Saturday in order to debate the way forward.
The deal will have to pass through parliament after being agreed by the EU which will be another hurdle for the Prime Minister with his current lack of a majority. Many Conservatives will take their line from what the DUP say, if they are not on board with the deal, its likelihood of passing is very slim. If a deal is agreed, then the swings in the pound will once again be based on comments out of parliament that hint towards whether the deal will gain a majority or not.
GBPUSD opened at 1.2659 and jumped sharply in the early afternoon, reaching a high of 1.2785 before closing at 1.2757
GBPEUR opened at 1.1480 and followed a similar pattern, reaching a high of 1.1578 and closing at 1.1572
The dollar faced pressure yesterday as investors grew weary of protracted trade tensions and lukewarm economic data. Most analysts do not see any short-term movement on a trade agreement, which also pulled the Chinese currency lower. The dollar index fell 0.15%.
EURUSD opened at 1.1027 and fell to an afternoon low of 1.0992 before jumping sharply to a high of 1.1042 and closing at 1.1020