Pound from 2 1/2 year high after Brexit deal, US stimulus in limbo By Reuters


© Reuters. File photo illustration of a two euro coin pictured next to a one pound coin on top of a portrait of British Queen Elizabeth

By Hideyuki Sano

TOKYO (Reuters) – The pound traded below a 2-1 / 2-year high on Friday after Britain and the European Union concluded a trade deal on Brexit, while general sentiment in currency markets was mitigated by a stalled US coronavirus economic aid package.

The pound traded at $ 1.3549, having failed to surpass its 2-1 / 2-year high of $ 1.3625 reached last week Britain has concluded a Brexit trade deal with the EU, just seven days before exiting the largest trading bloc in the world.

Against the euro, the pound rose to 89.80 pence per euro, after climbing a three-week high of 89.54 on Thursday.

The British currency also hit a 3-1 / 2 month high of 141.06 yen before falling to 140.22 against the Japanese currency, although trading has been slow as many financial markets closed for Christmas.

While the Brexit deal will preserve Britain’s zero-rate and zero-share access to the bloc’s single market and avoid a harmful “no deal” exit, it does not cover the nation’s much larger and more influential financial sector. And Brussels has not yet decided whether to give Britain access to the bloc’s financial market.

“It is important to recognize that this is just the beginning of a new business relationship to build on,” wrote Gavin Friend, senior market strategist at National Australia Bank (OTC 🙂 in London.

“We also have to wait for both sides to turn the deal in their respective ways designed for domestic consumption. Invariably the national press will talk about ‘victories’ against the other party, respectively.”

While the deal has been a relief to all market players, the pact’s essential nature leaves Britain much more aloof from the EU, analysts say, suggesting that the discount that has haunted UK assets since 2016 does not it will vanish soon.

“Now that the deal is done, over time we will start to see the economic impact of leaving the EU. And I think it’s clearly bad for the UK economy,” said Daisuke Uno, chief strategist at Sumitomo Mitsui. (NYSE 🙂 Bank.

“I think the pound will slide after all the positive aspects of a deal have already been priced,” he added.

In addition, hampering the UK economy in the short term, the prevalence of COVID-19 cases in England has increased, with one in 85 people infected in the past week due to a new infectious strain of the virus raging in the south. east of the country.

The US dollar was edged into a tight range as the stalemate over a $ 2.3 trillion coronavirus in Washington continued and raised the prospect of a partial government shutdown.

The dollar was trading at 103.55 yen, down 0.2% on the day, while the euro was trading almost unchanged at $ 1.2188.

The value was 90.285, from its 2.5-year low of 89.723 reached last week.

Offshore was flat at 6.5185 per dollar.

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