British Pound soared as Brexit deal became real possibility
The British Pound rallied on Friday as Britain and the European Union appeared ready to strike a trade deal. Riskier currencies, such as the Norwegian crown and Australian dollar, also surged forward.
Meanwhile, the U.S. dollar tumbled down in holiday-thinned trading. Investors believe the new stimulus deal would protect about $1 trillion in annual cross-channel trade from quotas and tariffs. As a result, demand for the safest assets lowered.
The British Pound surged forward, rising as high as $1.3620, after Ireland’s foreign minister announced that a deal was expected on Thursday. The Pound at last traded higher by 0.7% at $1.3590 with potential to jump to a 2-1/2 year high above $1.3625 after the negotiators announce the deal. Against the euro, the sterling hit to a three-week high at 89.54 pence.
According to sources in London and Brussels, a deal is close. British Prime Minister Boris Johnson had a conference call yesterday with negotiators, poring over reams of legal trade texts.
Ulrich Leuchtmann, the head of F.X. and commodity research at Commerzbank, stated that they have to assume that the forex market largely has priced in a “deal” outcome. However, Leuchtmann added that the sterling’s rise since Wednesday had not been “spectacular”.
How did other currencies fare?
Norway’s crown rallied on Friday, jumping as much as 0.4% versus the euro at 10.5045 earlier. The U.K. is Norway’s biggest destination for exports. That’s making the currency “super sensitive” to Brexit news – stated Andreas Steno Larsen, the global chief FX and rates strategist at Nordea in Copenhagen.
Sweden’s crown climbed up by about 0.2%. Trade sensitive currencies increased in other regions, as well. The Australian dollar soared by almost 0.3% to 76.00 U.S. cents. Meanwhile, the offshore Chinese yuan gained 0.2% at $6.5186. The euro remained unchanged at $1.21915 after a modest gain earlier. The safe-haven dollar tumbled down against a basket of currencies though, at last trading lower by 0.2% to 90.239.
