Pound Recovers as U.K. Sticks With Brexit Trade Talks for Now
Pound Recovers as U.K. Signals It Won’t Abandon Brexit Talks
(Bloomberg) -- The pound rebounded from a one-week low after the U.K. signaled it will continue Brexit trade talks beyond Prime Minister Boris Johnson’s Oct. 15 deadline.
Sterling climbed against the dollar after Britain appeared to soften its stance on walking away from negotiations. Earlier, the currency was poised for its largest two-day drop in three weeks on reports European Union leaders would say that sufficient progress hasn’t been made.
The pound rose 0.3% to $1.2973 as of 12:21 p.m. in London. Earlier, it fell to $1.2863, the lowest since Oct. 7. Against the euro, sterling was up 0.3% at 90.50 pence.
Johnson had previously said he would walk away from the trade talks if there was no clear progress by the EU summit that starts Thursday. He will now make a decision on whether to end talks after this week’s meeting, according to a person close to the negotiations. U.K. officials still believe a deal is possible as long as both sides hold intense discussions in the coming days, said the person, who asked not to be identified because the discussions are private.
“As has been the case in the past, whenever the Brexit threat was pushed further into the future, the pound tended to recover some ground,” said Valentin Marinov, head of G-10 FX strategy at Credit Agricole SA. “While this will not remove the cloud of Brexit uncertainty hanging over the pound, it will give the pound some breathing space, with investors now focusing on November for a potential breakthrough in the talks.”
Officials on both sides are still at loggerheads on several key issues including fishing rights and state aid.
The pound will remain vulnerable to the trade negotiations, but the odds of a no-deal outcome have fallen to around 20%-25% and the currency should finish the year at $1.35, according to Toronto-Dominion Bank.
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