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Pound leaps as Johnson defends 'genuine' efforts to reach a Brexit deal

Tom Belger
Finance and policy reporter
Prime minister Boris Johnson. Photo: Jeff J Mitchell/Getty Images

The pound jumped against the dollar on Thursday as UK prime minister defended his Brexit plans, calling his latest proposals a “genuine attempt” to reach a deal with Brussels.

Sterling was up 0.9% against the dollar to rise above the $1.24 mark (GBPUSD=X) at around 3pm in London.

It jumped as Johnson addressed parliament about his attempt to break the deadlock over the future of the UK-EU border in Ireland. But gains appeared to be capped as European members of parliament signalled they could block the plans.

Investors appeared to take hope from Johnson’s comments in the Commons, which also saw him suggest he could be open to talks with Labour MPs.

Speculation had been rife Johnson’s proposals were intended only to give the impression he wanted to reach an agreement, when the prospects of Brussels accepting his plans as they stand are slim.

The lift to the pound came in spite of stark warnings from Ireland’s prime minister and foreign minister about the significant gap that remains between the EU and the British government’s positions.

READ MORE: Boris Johnson speech to Conservative conference fails to lift bleak business mood

EU officials acknowledged Johnson had conceded some ground after the UK leader accepted Northern Ireland could remain under EU regulations for agri-food products and industrial goods under certain conditions.

But European officials and politicians are expected to demand further concessions to prevent a return to hard border checks on the island of Ireland.

“If that is the final proposal, there will be no deal,” said Irish foreign minister Simon Coveney on Thursday.

Deutsche Bank analysts said in a note to clients they did not expect EU leaders to agree to the offer, leaving their expectations of a deal unchanged at 20% and a no-deal Brexit unchanged at 50%.

The European Commission is now pouring over the legal text sent by UK officials to Brussels, with meetings between negotiators and Johnson expected to hold talks with key EU leaders this week.

READ MORE: Recession fears as the largest part of the UK economy unexpectedly shrinks

The rise in sterling also comes in spite of fresh recession fears in Britain, after an “ominous” set of figures showed a downturn in the UK’s dominant services sector.

A widely watched survey showed services, which make up around four-fifths of the UK economy, saw their activity unexpectedly shrinking in September.

The pound rose against the dollar on 3 October 2019. Photo: Yahoo Finance UK

Firms reported the biggest drop in employment in nine years, with companies not replacing leaving staff and suffering from clients delaying orders because of Brexit.

The purchasing managers’ index (PMI) data suggests the wider UK economy could be contracting, with performance also declining overall in services, manufacturing and construction for a second month in a row for the first time in seven years.