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Pound rises on hopes fisheries deal will break Brexit deadlock

Tom Belger
·Finance and policy reporter
·3-min read
Fishermen take part in a pro-Brexit protest at Newcastle Quayside.
An EU diplomatic source told Reuters the UK government seemed to be 'moving cautiously towards some opening on fisheries' in trade talks. Photo: PA

The pound strengthened on Wednesday, heading higher on signs of progress in post-Brexit trade negotiations and a weakening dollar ahead a Federal Reserve meeting.

Sterling was up 0.6% against the dollar (GBPUSD=X) at lunchtime in the UK, just under $1.30. It was also up 0.5% against the euro (GBPEUR=X), trading around €1.09.

It came after an EU diplomatic source told Reuters the UK government seemed to be “moving cautiously towards some opening on fisheries” in trade talks. Another said there had been a “tentative, modest” shift by the UK after the EU rejected its more hardline stance.

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Prime minister Boris Johnson’s official spokesperson also told reporters there was a draft UK-EU fisheries framework agreement “based on the bilateral agreement with Norway that the EU already has.”

The battle over mutual access to UK and EU waters has proved one of the thorniest issues in post-Brexit trade talks between Johnson’s administration and EU negotiators.

The pound has taken a hit in recent weeks as tensions have grown, and time is running out to strike a deal before Britain’s Brexit transition period expires at the end of the year.

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GBP/USD (GBPUSD=X)
Sterling was up 0.6% against the dollar at lunchtime on Wednesday in the UK. Chart: Yahoo Finance UK

Businesses and investors fear disruption whatever the outcome of talks, but the pound’s rise reflects the far less severe economic hit to the UK economy if a deal can be reached.

Traders’ greater hopes come in spite of the prime minister’s spokesperson’s insistence that Britain’s position had been “consistent throughout,” and that it would not accept proposals compromising UK sovereignty over its waters.

The pound’s rise also flies in the face of a warning by the president of the European Commission, Ursula von der Leyen, that chances of a deal were fading by the day.

"With every day that passes, the chances of a timely agreement do start to fade,” she told the European parliament, according to Reuters. She hit out at UK proposals to breach the withdrawal agreement already struck with Brussels.

Watch: Ursula von der Leyen says time is running out for an agreement to be struck with the UK on a post-Brexit free trade deal

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The UK government’s admission that it is prepared to breach international law has sparked an enormous backlash at home and abroad, which deepened further on Wednesday.

The head of the City of London corporation warned Britain could risk investment if it went ahead with the plans in its internal market bill.

Catherine McGuinness, its policy chairwoman, told PA: “The rule of law is the bedrock of our system and we undermine it at our peril.”

The dollar’s weakness also boosted sterling, with traders expecting hints of a further loosening in policy from the Federal Reserve after the US central bank’s policymakers meets later on Thursday.