On Wednesday the GBP dropped from its five-month high against the USD as investor concern grew regarding Brexit. The euro gained yesterday as a result following positive developments about Britain leaving the EU. The fading optimism regarding the trade talks between China and the US kept the USD within range.
GBP drops from five-month high against the euro ahead of Brexit talks
The GBP pulled from its highest level in five months versus the euro with investors anticipating positive Brexit talks on Thursday and Friday. There was optimism as last-ditch talks on Tuesday indicated that the sides could reach a draft agreement before the summit. Reports that Britain and the EU are about to reach an agreement boosted the GBP.
Michael Barnier the chief Brexit negotiator of the EU indicated that a deal is possible this week for Britain to leave the EU. The euro and the sterling pound gained following the development. However, economists have warned that if there is no deal by October 31 that will have damaging implications for Eurozone and Britain.
Brexit deal possible this week
On Tuesday Prime Minister Boris Johnson said that they were working to ensure there is a Brexit deal before Thursday. A spokesperson of the PM indicated that there was a constructive discussion going on and they were keen on the time limits.
Daiwa securities foreign exchange strategists in Tokyo, Yuko Ishizuki indicated that the sides could agree on a deal but there are doubts about beating the deadline. There are concerns also regarding whether parliament will approve the deal. The GBP had an impressive run but some traders are already easing their positions.
President Trump announced Phase 1 of the traded deal between the US and China last week. But investors have been cautious because Trump didn’t outline the details of the deal. On Monday reports emerged that Beijing wanted more talks before the end of the month to iron out details of the deal before president Jinping could sing it.
The euro climbed 0.2% on Tuesday to $1.046 against the USD before shedding most of the gains. The GBP dropped on Wednesday by 0.2% to $1.2758 from the five-month high of $1.2800 attained in the previous trading. Against the euro, the GBP dropped 0.23% to 86.51. There are high hopes of having an orderly Brexit.
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