Pound bounced on Thursday on reports that London is close to sealing a financial services deal with Brussels. Further, the Bank of England signaled slightly faster future interest rate rises if Brexit goes smoothly.
According to Reuters Britain is close to agreeing a deal giving UK-based financial services firms basic access to EU markets.
The British currency also rallied more than 0.5% against the euro. Investors welcomed raised expectations that UK financial institutions would not lose privileged access to the EU. This is a major concern for markets as the financial services sector is a major contributor to Britain’s economy.
The BoE kept interest rates on hold on Thursday but kept its options open for slightly faster future rate rises in case of a smooth Brexit. On the contrary, it said all bets were off if next March brought a “disruptive” EU departure.
Sterling jumped to a day’s high of $1.2930 and traded up 1.2% on the day after the BoE’s decision.
The pound bounced versus the euro as well, up nearly 0.5% at 88.27 pence.
Sterling’s gains against the dollar left the pound on track for its biggest one-day rise since August.
Forex – Commodities – Pound bounced on positive Brexit reports
The dollar moved lower by 0.5% to 96.642, easing from a 16-month high of 97.2 hit on Wednesday.
The Australian dollar, a barometer of investor sentiment, jumped 1%, boosted by data showing a strong rise in the country’s trade surplus.
The New Zealand dollar gained 1.4%.
The yen rose slightly to 112.90. The Japanese currency weakened to a three-week low on Wednesday. The Bank of Japan signalled its intention to maintain its ultra-loose monetary policy for some time.
The euro rebounded from 2-1/2-month lows on Thursday as currencies hit hard by recent dollar buying roared higher. The euro rose to $1.1389, away from recent lows that had followed weak euro zone data.
Sources: Reuters, CNN money, BBC