Sterling bounce on Brexit deal optimism

Irving Hamilton
November 9, 2018

Analysts say that until the deal is actually inked then there will be constant uncertainty which will continue to grow as the timeline for the Brexit shrinks.

This follows a jump in Sterling yesterday after Brexit Secretary Dominic Raab gave a verbal "thumbs up" upon leaving Downing Street following a crunch cabinet meeting.

Apart from this, the United States midterm elections might infuse a fresh bout of volatility across global financial markets, which might eventually derive the Japanese Yen's safe-haven demand and move the cross.

Against the dollar, the pound hit a two-week high.

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The chances of reaching a withdrawal agreement have risen after UK Prime Minister Theresa May reportedly came close to winning the backing of her Cabinet for her plans to resolve the issue of the border between Northern Ireland, which is part of the UK, and the Irish Republic.

A senior member of the Northern Irish Democratic Unionist Party earlier said it looked like Britain would exit the European Union without a deal, indicating domestic political headwinds togetting a deal through a split parliament with less than five months to go to Brexit day.

In absence of any major market moving United Kingdom economic releases, the incoming Brexit headlines might continue to influence sentiment surrounding the British Pound and produce some meaningful trading opportunities. Implied volatility on one-month pound options, a gauge for expected swings in the British currency, is at its highest levels since February. Jeffrey Donaldson of the DUP said that if Ireland were treated any differently from the other United Kingdom provinces then the deal would not be encouraged.

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