The British Pound advanced against the Euro and a host of other major currencies on news of progress in post-Brexit trade negotiations, however, renewed financial market turbulence following the announcement of new major lockdowns in Europe has pushed the Dollar higher across the board.
Foreign exchange market participants bid Sterling after a newswire report on Wednesday said negotiators had resolved “some of the biggest disagreements that have long bedeviled the Brexit talks.”
The progress is said by sources quoted by Bloomberg to “raise hopes a deal can be reached by early November” and foreign exchange analysts say the Pound will likely remain supported around current levels as long as expectations for a deal remain intact.
Following an intensive round of negotiations held in London, it is reported the EU and UK have begun work on the text of an agreement on establishing a level competitive playing field, and are close to finalizing a joint document covering state aid.
Bloomberg adds the two sides have also moved closer to deciding essential aspects of how any accord will be enforced.
The Pound rallied against the Euro in the wake of the news and went higher against the majority of its G10 peers.
“Tactically, we see a window of opportunity to take a more constructive view on GBP,” says Adam Cole, Chief Currency Strategist at RBC Capital Markets. Cole has made buying the Pound against the Euro his “thematic trade of the week”, in anticipation of positive developments concerning Brexit trade negotiations.
“A final conclusion is unlikely this week, but expectations could swing toward exiting with a deal. GBP should also be a beneficiary of month-end hedging flow if equities maintain their month-to-date gains into the end of the week,” says Cole.
The Dollar has meanwhile found strong buying interest this week given the substantial safe-haven demand triggered by investors owing to Wednesday’s sizeable stock market sell-off linked to major lockdowns being introduced in Germany and France.
This safe-haven driven demand for the Dollar could continue over the coming days say, analysts. “The rush for the exits will continue for the time being. The impressive dive in European markets over the past few days has revealed how dire sentiment is towards this part of the world, with already weak GDP forecasts likely being hastily revised yet lower thanks to the return of lockdown policies,” says Chris Beauchamp, Chief Market Analyst at IG.
GBP/UDS Short (Sell)
ENTER AT: 1.3005