Sterling edges higher as Brexit talks enter ‘tunnel’ stage
Sterling climbed to a three-month peak versus the dollar after Times Radio said Brexit trade deal talks had entered the “tunnel” stage of negotiations. The “tunnel” is a term used for an intense final stage of secretive, make-or-break negotiations.
Sterling rose as much as 0.9% to $1.3441, extending gains after the news broke. While negotiators have been in this phase of Brexit talks for several weeks, the jump higher in the pound shows how the market is ready to jump on signs an agreement is in reach. There is renewed optimism that a deal can reached by the end of this week.
This week had been widely billed as the week within which a deal would finally be sealed by negotiators, but Ireland’s Deputy Prime Minister Leo Varadkar on Tuesday said talks could go on for a “couple of weeks”.
Breaking News this morning sees the UK as the first western country to license a vaccine against Covid, opening the way for mass immunisation with the Pfizer/BioNTech vaccine to begin in those most at risk next week. The vaccine has been authorised for emergency use by the Medicines and Healthcare Products Regulatory Authority (MHRA), ahead of decisions by the US and Europe. The MHRA was given power to approve the vaccine by the government under special regulations before 1 January, when it will become fully responsible for medicines authorisation in the UK after Brexit.
Yesterday the dollar fell to its lowest level in more than 2-1/2 years, as risk appetite increased on the prospects of further fiscal stimulus from the United States as well as expectations of a solid global recovery. The dollar fell sharply as news of a so called COVID bill, as well as a resumption of talks between U.S. Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi later on Tuesday about a stimulus package.
The proposed relief bill was $908 billion and would fund measures through March 31, including $228 billion in additional pay check protection funds for hotels, restaurants and other small businesses.
The news saw currencies that trade higher in times of risk appetite such as the euro, sterling, as well as the Aussie, Kiwi, and Canadian dollars all rose against the USD.
Also weighing on the safe-haven dollar was weaker-than-expected U.S. manufacturing activity data and speculation that the Federal Reserve will act to support the economy before vaccinations become available.
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