Sterling hits 10-week high on vaccine and Brexit deal optimism
Sterling rallied to a two and a half month high today, as more positive news about a potential Covid-19 vaccine propelled investors to buy riskier currencies and offset concerns about whether Britain and the EU can clinch a Brexit trade deal.
Tonight the pound is up 0.3 per cent to $1.332, while against the euro it rose 0.45 per cent to €1.125, a near two-week high.
Optimism has kept sterling buoyant and news that Britain’s AstraZeneca vaccine for the novel coronavirus could be around 90% effective without any serious side effects added to the positive mood and pushed the pound to a two and a half month high.
London and Brussels this week will continue their negotiations to agree a deal on their future trading relationship, though time is now running very short as Britain’s post-Brexit transition period ends in fewer than six weeks on 31 December.
Without an agreement Britain would revert to trading with the EU on World Trade Organisation rules, an outcome both sides believe would prove highly disruptive for their economies.
Most investors believe a deal will be clinched, even if it is a bare-bones one that leaves some trade discussions for later.
“The FX market is seeing it as a GBP positive sign that the negotiations are being continued in December,” said Ulrich Leuchtmann, an FX strategist at Commerzbank, while adding that an extension to the December 31 transition period end-date is now likely as the two sides run out of time to forge a deal.