The Pound has bounced higher today as hopes rekindle for a Brexit deal as talks recommence today.
Earlier in the day Michel Barnier, the EU’s chief Brexit negotiator, told EU lawmakers that a deal “is within reach” if both sides push hard to find solutions to their sticking points over the next few days. This is nothing new but the tone has softened a lot from last week’s EU Summit and traders will take any positives they can, as generally many argue that a thin deal is likely around November time.
The House of Lords have heavily rejected the Government’s controversial draft legislation (internal market bill) that would have overruled parts of the agreed Brexit withdrawal agreement which has also supported the Pound, as it makes a deal with the EU more likely. Peers backed a “regret” amendment by a majority of 226 – the largest defeat in more than 20-years – and warned that the bill “would undermine the rule of law and damage the reputation of the United Kingdom”.
In other news, market risk appetite has been boosted after President Trump increased hopes for a large covid stimulus package. Democrats and Republicans have been arguing for weeks over a new relief package but last night the two sides looked closer to an agreement as Trump seems more willing to increase the size of the bill. This has boosted traders appeal for riskier currencies and led to the dollar being sold.
As a result, the GBP/USD has pushed up nearly 1.5% today and trades at a 6-week high The GBP/EUR has moved 1% higher and trades towards the upper end of where it’s been over the past 6-weeks. The US election is coming further onto traders radars’ and there’s now less than 2-weeks to go, with polls indicating that Biden has the lead.