Pound to Dollar Rates: Pound Gains on Trade Deal Hopes

Pound to Dollar Rate Slips from Three-year High

We have been told the clock is ticking on a post-Brexit trade deal for a while, but if ever there was a time to use this well-worn phrase it’s now. With less than a week to go before the transition phase expires, the Christmas break couldn’t come at a worse point – snatching away valuable time that could be used to get a deal over the line.

Acutely aware of this, Boris Johnson and European Commission President, Ursula von der Leyen are in “close contact” in a bid to seal a post-Brexit agreement before talks break up for Christmas today. British officials claimed a deal was “possible”, despite negotiators still sparring over fisheries and other issues — including competition rules for a “level playing field”.

The pound surged in value yesterday, and into this morning, as talks between the UK and EU intensified and traders placed bets on a trade deal being struck before Christmas. Another major news story added to its momentum: the battle against coronavirus – after France announced it was reopening its borders to UK traffic having imposed a travel ban following the discovery of a new strain of coronavirus in the UK. The pound to dollar rate shot above the 1.35 benchmark on signs that significant progress was being made in Brussel and developments across the Channel.

Brexit Trade Hopes Send Dollar Lower

The dollar struggled under the weight of growing risk appetite yesterday, fed by mounting expectations that a post-Brexit trade deal between the UK and EU is imminent. The upbeat Brexit headlines overshadowed Donald Trump’s threat to veto the long-awaited US stimulus bill, which the President said should be amended to increase the amount delivered to Americans.

Looking Ahead

The Christmas break means the UK and US economic data calendars are bare for the rest of the week. Unsurprisingly, all eyes will be on developments in Brussels today to see if negotiators can finalise details on fishing quotas – the main obstacle between securing a deal and a hard Brexit.

Today is expected to be the day both sides finally get a Brexit deal done after talks went through the night. If this proves to be the case – and it’s still a big if – it will be the perfect Christmas present for the pound. However, there will still be hurdles to overcome before a deal is signed sealed and delivered: London and Brussels would have until 31st December to get their proposals approved by parliamentarians.

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