LONDON – The British pound hit a 31-month low on Thursday as investors rallied against the U.S. dollar. And the long-awaited Brexit trade deal by the European Union will bet.
Sterling rose 0.8% to close at 35 1.3593 after hitting a previous session of 3 1.3616. Earlier this month, the currency broke the brew high of 2020 at 36 1.3624, a level that has not been felt since May 2018.
Brexit negotiators on both sides are said to be on the offensive to strike a narrow free trade agreement on Thursday. It comes after months of tense political squabbles over several key sticking points.
“This is going to be a slim deal,” Jane Foley, head of FX strategy at Rabobank, told CNBC on Thursday. “The general feeling is that services are being left in the cold and negotiations will continue next year.”
Irish Foreign Minister Simon Coweni said the post-Brexit trade deal was expected to be announced on Thursday, while the announcement was delayed by a “last-minute move”.
Officials from both the European Union and the UK said the deal could still be “hours away” as the timing was unclear with Reuters at noon in London. The press conference, scheduled for early Thursday, was delayed as the two sides finalized a “small text” of the agreement on the right to fishing, Coveni said.
The confirmation of the deal will wrap up a wide range of tense negotiations over future trading relations between Britain and the EU. At least there are differences between the two sides on many issues, not just fishing.
The European Union wants to maintain the UK’s access to water for its fishing fleet, while the UK wants to curb these fishing rights to a large extent. There is no scenario that the UK’s water use in the European Union could end abruptly, and vice-president, the UK also threatened to deploy troops to protect British waters.
Looking ahead to next year, Barrenburg senior economist Colm Pickering said the deal would support the pound.
“By removing major weak risks to the UK economy, both in the near and long term, the deal will unlock significant investment in the UK and support recovery after the ongoing coronavirus shock begins to subside, as well as provide a positive backdrop. He said in a note on Thursday.
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