Brexit: Lower Brexit uncertainty and 1% rise in the pound sterling

LONDON: The British pound jumped as a draft agreement between the United Kingdom and the European Union supported a free trade pact and close cooperation after Brexit.

The pound sterling gained more than 1%, reaching its highest level in a week after the statement cleared some uncertain post-exit relations with the UK, its largest trading partner. The statement on future relations, being negotiated before the EU summit Sunday to sign an agreement on Brexit, also indicates that both parties are "determined" to replace the controversial security system in order to avoid a hard border with Ireland.

"The headlines seem to be going in the right direction with respect to the exchange sentiment, talking about free trade," said Stuart Bennett, head of the Group of 10's currency strategy at Banco Santander. Nevertheless, the news is not enough to dispel doubts about the approval of the divorce agreement by lawmakers in the House of Commons in December.

"Voting in Parliament remains the biggest challenge," said Mikael Olai Milhoj, an analyst at Danske Bank. Neil Jones, head of currency hedge fund sales at Mizuho Bank, said investors were benefiting from the recovery and sale of sterling while remaining skeptical about the prospects for a parliamentary vote.

The pound climbed 1.2% to $ 1.2927, its highest level since November 15th. It was trading at 1.2870 dollars at 12:18 London time. It gained 0.6% to 88.59 pence for one euro. British government bonds fell, the yield on 10-year bonds rose three basis points to 1.42%, while the benchmark, the FTSE 100, fell 1% . Indicating the fragility of the currency's gains, the pound briefly reduced the bulk of Thursday's gains, after the EU said some Brexit-related issues had not yet been resolved.

British Prime Minister Theresa May wants to please the rebels of her party and the Democratic Unionist Party of Northern Ireland, which she depends on for her parliamentary majority.