Sterling swayed around five-month highs and stocks in London fell on Wednesday in another volatile day of trading for UK assets.
Contradictory headlines about whether Britain and the EU were on the verge of agreeing a Brexit deal weighed. Financial markets remained hostage to news as British Prime Minister and EU negotiators raced against the clock to forge a withdrawal agreement before an EU summit.
Sterling has surged some 5% since late last week when London and Brussels restarted intense Brexit negotiations.
But on Wednesday, sources in the bloc said the talks had hit a “standstill”. That encouraged selling before an RTE reporter, citing EU sources, said the main stumbling block to a deal had been removed. This sparked a brief recovery in the currency and British shares.
Disagreements centre on a future trade deal and the rejection by Northern Ireland’s Democratic Unionist Party. DUP supports the ruling Conservative Party in the British parliament, of customs solutions tentatively agreed by negotiators for the Irish border. The DUP’s leader Arlene Foster said the EU sources cited by RTE were talking “nonsense” and discussions continued.
Sterling was up marginally at $1.2790 a new 5-month high, on optimism that the DUP was coming to a deal. Earlier the British currency has rallied to $1.2840. Against the euro, the pound was 0.1% weaker on the day at 85.985 pence — also off five-month highs hit earlier.
Trading in sterling options suggested high volatility in the currency was likely one way or another.
START TRADINGForex – Another volatile day of trading for UK assets
Sterling trading volumes have surged in recent days. On Tuesday investors bought and sold more pounds than on any single day since November 2018.
The dollar held near a four-week low as trade tension between Washington and Beijing continued to weigh on the global growth outlook. The dollar’s losses were most pronounced against the Japanese yen, which had reached a two-and-a-half-month low.
Trade-oriented currencies such as the Australian dollar and the New Zealand dollar also weakened. The kiwi dollar last traded down -0.5% at 0.6261.
Against an index of six other currencies, the dollar was weaker at 98.27. It was just above an intraday low of 98.16 reached in Asian trading, its lowest in nearly four weeks.
Gold prices edged higher on Wednesday after shedding nearly 1% in the previous session. Uncertainties surrounding Britain’s negotiations to leave the European Union, while a risk-on sentiment capped the bullion’s gains. Spot gold was up 0.1% at $1,482.54 per ounce as of 0725 GMT.
Oil prices eased further below $59 a barrel on Wednesday, pressured by concerns about weaker demand for fuel due to slower economic growth and forecasts of a further rise in U.S. crude inventories. Brent crude, the global benchmark, slipped 7 cents to $58.67 a barrel by 1315 GMT. U.S. crude gained 1 cent to $52.82.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money