LONDON – The British pound jumped close to 31-month highs on Thursday, as investors bet Britain and the European Union will conclude a long-awaited Brexit trade deal.
The pound rose 0.8% to about $ 1.3593, after earlier reaching a session high of $ 1.3616. Earlier this month, the currency breached a 2020 high of $ 1.3624, a level it has not reached since May 2018.
Brexit negotiators on both sides are said to be on the verge of concluding a narrow free trade agreement on Thursday. It comes after months of tense political struggles for several key points.
“This is going to be a weak deal,” Jane Foley, head of FX strategy at Rabobank, told CNBC on Thursday. “The general feeling is that the services will be left in the cold and discussions will continue next year.”
Irish Foreign Minister Simon Coveney said a post-Brexit trade deal was expected on Thursday after a “last-minute issue” delayed an announcement.
The timing remains unclear, with Reuters at noon in London citing both an EU and a British official, saying the deal could be “a few hours away”. Press conferences scheduled for early Thursday have been postponed as both sides finalize the “small text” of a fisheries rights agreement, Coveney said.
Confirmation of an agreement would conclude an extended period of tense negotiations on the future trade relationship between the UK and the EU. Both sides faced a number of key issues, not least in the field of fisheries.
The EU wants to maintain access to UK waters for its fishing fleets, while the UK wants to severely limit these fishing rights. A scenario without an agreement could cause the EU’s access to British waters to end abruptly, and vice versa, and Britain had even threatened to deploy the army to protect British waters.
Looking ahead to next year, Berenberg’s chief economist Kallum Pickering said the deal would provide support for the pound.
“By eliminating a major risk of disadvantage for the UK economy, both in the short and long term, an agreement would unlock significant investment in the UK and support recovery once the ongoing coronavirus shock begins to disappear, as well as provides a positive background for UK and Sterling stocks heading into 2021, “he said in a note on Thursday.