Sterling soared Thursday after news that the U.K. and the European Union reached a preliminary agreement on what kind of relationship the two will have after Brexit goes into effect. The move came amid an otherwise quiet day in the forex markets due to the U.S. holiday.
The ICE U.S. Dollar Index
fell 0.2% to 96.507, on the heels of a weaker day on Wednesday. After a sharp drop Tuesday, U.S. stocks squeaked by with a gain on Wednesday, erasing much of the advance in late trade, though tech stocks staged a recovery.
The dollar’s losses stemmed from the British pound
which surged to $1.2869 from $1.2776 late Wednesday, after European Council President Donald Tusk announced news of a political declaration on future relations. U.K. Prime Minister Theresa May will likely use that to push through a Brexit deal in a divided parliament. This now means EU leaders will be able to sign off on May’s Brexit agreement in a special summit on Sunday.
“This is the right deal for the U.K. It delivers on the vote of the referendum. It brings back control of our borders, our money and our laws and it does so while protecting jobs, protecting our security and protecting the integrity of the U.K.,” May said in a statement in front of 10 Downing Street on Thursday.
— UK Prime Minister (@10DowningStreet) November 22, 2018
The U.K. rates market is only pricing in a rate increase in the U.K. in March 2020, which “can support sterling short term, though it won’t take long before we refocus on the challenge facing the Prime Minister in getting House of Commons support for her Brexit deal,” said Kit Juckes, global macro strategist at Société Générale, in a note. The European parliament must also approve the Brexit deal.
The dollar’s main rival, the euro
caught a bit of that upward momentum for sterling, rising to $1.1405 from $1.1395 late Wednesday in New York.
U.S. markets will be closed in observance of the Thanksgiving Day holiday on Thursday and Wall Street will see a shortened session on Friday, which could mean thinner volumes and more exaggerated movements for currencies.
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Source : MTV