New York. The pound surged to the highest level in two months after comments by European Commission President Jean-Claude Juncker that a Brexit deal can be reached by October 31.
The currency headed for its longest run of weekly gains since January as Sky News reported that Juncker said in an interview he was doing “everything” to prevent a no-deal Brexit. That followed positive sentiment on Thursday, when Irish Prime Minister Leo Varadkar said he’d meet his UK counterpart Boris Johnson next week “to try and get a deal,” amid some tentative signs of progress to break the impasse over the Irish border.
The move in the pound is sustainable “if a no-deal Brexit gets avoided,” Brendan McKenna, a foreign-exchange strategist at Wells Fargo Securities in New York, said in an email. “But if those conversations fall apart, you would probably see a big” sell-off.
The pound gained 0.3 per cent to $1.2567 by 8:45am in London, after touching the highest since July 15. It’s the best performer among peers this month, with a 3.4 per cent rally.
Negotiations around Brexit have been stuck for months with little sign of movement as the October deadline looms for the UK to leave the European Union.
Traders are hanging on every word as they try to ascertain if an economically damaging crash-out scenario can be averted. The positive noise around efforts to forge a deal for now is just rhetoric that can be interpreted either way. Juncker himself said Wednesday that a risk of a no-deal Brexit was “palpable.” ‘
It’s “really unclear as to where things actually stand,” McKenna said.
Sterling could rise 5 per cent if a deal is clinched, or tumble to parity with both the dollar and the euro if the UK crashes out of the bloc, according to Shamik Dhar, chief economist at BNY Mellon Investment Management.