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Summary
- Pound sterling was at around 31-month high against the US dollar on 17 December. This is the highest level since May 2018.
- The favourable indication from the Chief Brexit negotiator restated mild optimism amidst the market participants
The Great Britain pound (GBP) held the strength against the US dollar on Thursday after the Chief Brexit negotiator of the European Union Michel Barnier signalled positive development in the ongoing negotiations in the prospective trade arrangement between the UK and the EU. As per the foreign exchange trading data available with Thomson Reuters, the value of pound sterling by dollar oscillated between 1.3496 and 1.3623 on 17 December.
The restated hopes over a conclusive deal between the UK and the partner countries of the EU have helped in spreading a mild wave of optimism in the financial markets.
GBP at 31-month high
The GBP vs USD pair traded at 1.3598, up 0.67 per cent at 13:42 GMT, Reuters data stated. As per the historical foreign exchange data, a unit of pound sterling equalled 1.38 US dollar in May 2018.
According to the Bank of England’s currency conversion database, one pound translated into 1.3495 units of the greenback as on the close of trading on 16 December. The pound sterling had settled at a 31-month high level of 1.3497 against USD on 3 December 2020.
GBP vs USD spot (32-month performance)
(Source: EODHD/Others, Thomson Reuters)
The domestic currency regained strength on 17 December after the chief Brexit negotiator of the EU Michel Barnier hinted that there is a “good progress” in the ongoing deliberations between the United Kingdom administration and the officials of European Union. “… will only sign a deal protecting EU interests & principles," Barnier said in a tweet. Nonetheless, there is no concrete evidence that can suggest that can solidify the hopes of a probable trade agreement between the UK and the EU.
The persisting uncertainty with regard to the trade deal and the fears over a “no-deal Brexit” continue to weigh on the stock markets, as well as the exchange rate of the pound sterling. The GBP trading at a 31-month high against the US dollar is also partly due to the weakness in the greenback on the back of muted stimulus packages in response to Covid-19, higher-than-anticipated coronavirus cases and the infirmity of the USD against a basket of other currencies.
On the other hand, the GBP to EUR pair has also gained on the positive side in the present week retracing the losses recognised in the last week. According to the Reuters data, a unit of pound sterling equalled 1.1094 euros, up 0.21 per cent at 1:40 pm GMT. The GBP to EUR paid ended at 1.1073 at the close of trading on 16 December, the BoE data showed.
GBP vs EUR spot (YTD performance)
(Source: EODHD/Others, Thomson Reuters)
Equities stay lacklustre
The solidity in the GBP vs USD pair failed to lift the mood of market participants as the stock market showed a lacklustre trading day FTSE 100 index ended marginally in red at 6,551.06, down 19.85 points or, 0.30 per cent from the previous close of 6,570.91 as on 16 December. However, the wider share indicator FTSE 250 extended the gains and closed at 20,296.04, up 199.48 points or, 0.99 per cent on 17 December 2020.
