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The British pound has hit near its 2020 highs against the dollar thanks to growing optimism Brexit negotiators will close a Christmas Eve trade deal between the UK and the EU.
The pound climbed 0.6% to $ 1.3579, leaving it in the striking range of the 2020 high of $ 1.3624 it hit earlier this month. The British currency also rose against the euro, gaining 0.4% to € 1.1119.
Progress in trade talks came after European Commission President Ursula von der Leyen and British Prime Minister Boris Johnson took personal control of the negotiations in a race to break the deadlock on issues such as human rights. peach.
“The hope is that this never-ending process will end as soon as possible,” said Stefan Koopman, senior market economist at Rabobank.
He said if a deal was reached on Thursday evening, there “should be just enough time left to get the legal and procedural work done to allow provisional application of the new treaty from January 1”.
“Otherwise, the EU and the UK would really have [into] unknown territories, ”he added.
The brighter outlook for Brexit also took its toll on the UK government debt market, where yields were suppressed by the prospect of an interest rate cut by the Bank of England, possibly in territory. negative, to mitigate the disruption without agreement of the economy and financial markets of the country.
The yield on the 10-year gilt, which moves inversely to stock prices, rose by a tenth of a percentage point on Wednesday afternoon to 0.29%, in its largest increase since March, and failed hardly changed Thursday morning.
The UK’s departure from the EU has been the defining theme of the currency since the referendum in June 2016.
In the run-up to the announcement of British voters’ choice to leave the bloc, the pound was trading at around $ 1.50 against the dollar.
The pound experienced one of its most severe drops following the referendum result, falling to just over $ 1.32. A scorching dollar rally during the market turmoil of March 2020 pushed the currency up to around $ 1.14, but the pound has generally hovered at $ 1.30 since the Brexit vote, although it has been shaken more and more by the vagaries of trade negotiations.
Despite the often tense nature of the negotiations, investors and analysts were overwhelmingly confident that some form of deal would be reached. Without one, some have predicted that the British Pound could drop as low as $ 1.20 or even $ 1.10.
European stock markets also opened higher on Thursday, with the regional benchmark Stoxx 600 gaining 0.3% in early trades. Germany’s Xetra Dax added 1.3 percent while the UK’s FTSE 100 rose 0.5 percent.
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