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Pound under pressure as Boris Johnson says: 'Time to draw stumps'

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Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
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Watch: Pound jumps as UK agrees to drop controversial Brexit legislation

Volatility continued for the pound on Tuesday, as Brexit trade talks appeared to enter their crucial final stretch.

The pound was down 0.4% against the dollar (GBPUSD=X) and euro (GBPEUR=X) by lunchtime in London. Even still, it remained near a three-month high against the dollar.

Pressure on the currency came as UK Prime Minister Boris Johnson signalled Brexit trade talks were likely to end in the coming days, one way or another.

Britain's prime minister Boris Johnson will travel to Brussels in the coming days for talks with his EU counterpart. Photo: Kirsty Wigglesworth/AP
Britain's prime minister Boris Johnson will travel to Brussels in the coming days for talks with his EU counterpart. Photo: Kirsty Wigglesworth/AP

“It is time to draw stumps, and that is just the way it is,” Johnson told journalists on Tuesday morning.

The prime minister said he was “optimistic” about securing a deal but warned the situation was “very, very difficult at the moment.”

“Traders know that this will be the final push for a Brexit deal, and the sterling has become increasingly more volatile on the back of this,” said Naeem Aslam, chief market analyst at Avatrade.

“The currency is very likely to see major spikes while a deal and no-deal scenario continues to [be in] play.”

The pound has had a volatile 24 hours thanks to Brexit negotiations. Photo: Yahoo Finance UK
The pound has had a volatile 24 hours thanks to Brexit negotiations. Photo: Yahoo Finance UK

Johnson is set to travel to Brussels for face-to-face talks with European Commission president Ursula von der Leyen, possibly as soon as Tuesday. News of the trip, which is intended to break the ongoing negotiating stalemate, spurred a late rally for the pound on Monday evening.

READ MORE: UK government backs down on internal market bill in event of EU-Brexit deal

Brexit trade talks remain stuck on fisheries, level playing field rights, and the enforcement mechanism of any final deal — three issues that have bedevilled negotiators for months.

Headlines from the negotiations have been almost relentlessly negative in recent days, with France threatening to veto a deal and both the EU and UK warning talks could end in no deal. However, analysts remained optimistic a deal could be done.

“If the PM thinks a visit to Brussels is worthwhile, then that would suggest the doorway to a deal remains open,” said Micheal Hewson, chief market analyst at CMC Markets.

“Perhaps, in these strange pandemic afflicted times, this is what the choreography of a deal looks like, with both sides playing to their own domestic agendas, cognisant of the fact that for the sake of a small compromise on either side the route to a deal still remains within touching distance.”

EU leaders will meet for a pre-planned summit on Thursday and Friday. Experts say this could be the final feasible occasion for them to approve a deal before the end of the year.

“For many investors, the base case scenario is still that there will be [a Brexit deal] in the final hour, final minute, and the final second,” Aslam said.

While Downing Street signalled talks were coming to a close, the EU suggested negotiations could continue into 2021.

“If that deal is not in place on January 1, then we have a no-deal situation,” European Commission spokesperson Daniel Ferrie said. “That does not exclude that negotiations can continue.”

WATCH: Brexit countdown: 23 days until the end of the transition period