WATCH: UK - US sign post-Brexit customs agreement
The pound continued to rise against the dollar and euro on Thursday, amid continued optimism about the possibility of a Brexit trade deal and hopes that a quick US trade deal could be possible too.
Micheal Barnier, the EU’s chief Brexit negotiator, said there had been “good progress” in Brexit talks on Thursday morning. Separately, US Trade Representative Robert Lighthizer told the BBC a free trade agreement between the UK and US was “extremely likely.”
The comments helped propel sterling to a fresh two-year high against the dollar. The pound was up 0.7% against the US currency to $1.36 (GBPUSD=X) in afternoon trading.
Cable was helped by weakness in the dollar after the US Federal Reserve on Wednesday kept up its ultra-loose monetary policy and maintained it programme of dollar printing known as quantitative easing.
“While the Fed left policy unchanged, it did alter its forward guidance on asset purchases, which implies that QE will continue for a considerable amount of time,” said John Fahey, a senior economist at AIB.
Lighthizer’s comments to the BBC were supportive of sterling on the other side of the trade.
“I think it’s extremely likely that we have an FTA — a free trade agreement — with the UK before long,” Lighthizer said in a TV interview.
Sterling rose 0.5% against the euro to €1.1121 (GBPEUR=X), but was trading 0.3% higher in mid-afternoon trading. The pairing continues to benefited from renewed optimism that the UK can strike a trade deal with the EU before the Brexit transition period ends on 1 January 2021.
“Good progress, but last stumbling blocks remain,” Barnier tweeted on Thursday morning. “We will only sign a deal protecting EU interests & principles.”
European Commission president Ursula von der Leyen told MEPs on Wednesday there was “a path to an agreement now”, which helped spark the current sterling rally.
Michael Gove, the UK’s cabinet secretary, told MPs on Thursday: “Intensive talks are ongoing, with both negotiating teams working day and night to reach a deal.”
But he later said the chances of a deal were “less than 50%,” telling a committee of MPs “significant” gaps remained between both sides.
He also warned the UK could still crash out if a deal is not made law by the end of the year—even if it has been agreed with EU negotiators. “If we don’t have time...the clock has run out.”
But he said Britain could “move quickly” with legislation while also giving MPs time to debate the measures.
Raffi Boyadjian, a senior investment analyst at XM, said talks were likely to “drag on” into the weekend, with fishing rights remaining a sticking point in negotiations.
In his interview with the BBC, Lighthizer suggested any trade deal between the US and UK would have to wait until the conclusion of talks with the EU.
“Your relationship with Europe will be sorted out one way or another and then I think there’s no reason why the United States and the UK can’t get to a deal fairly expeditiously after that,” he said.
“There are serious issues that we have to worry about. We have agricultural issues, we have standards issues — there’s a lot of things that are tough compromises that have to be made and those are things that tend to come towards the end of a negotiations.
“I’m hopeful that we can get some kind of agreement, you never know, we don’t have a lot of time left.”
Additional reporting by Tom Belger.
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