Economy

Pound Surges on the Hopes of a Brexit Breakthrough

Pound Surges on the Hopes of a Brexit Breakthrough

The euro and sterling climbed higher this morning as investor confidence rose on news Britain had struck a draft divorce deal with the European Union after more than a year of talks.

Downing Street said "substantial issues" still need to be resolved as negotiators try to secure an agreement over the UK's exit from the EU. The shared currency last bought $1.1241, down from 1.1336 late Friday in NY.

On the Brexit front, hopes for the skeleton of a workable Brexit deal to be presented at the EU's Brexit summit this month, and with UK Prime Minister Theresa May being forced to cancel an emergency Brexit cabinet meeting amidst backlash from within her own parliament, hopes are waning for any progress to be announced before December's meeting as well, and steadily-deflating expectations for a soft-Brexit scenario are going out the window, and taking the Pound's exchange rate with them. May's Caand Leslie Adlerbinet will meet on Wednesday on the Brexit draft.

The euro meanwhile was down 0.9% at $1.1249, also around its lowest since June 2017.

MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.10 percent.

Hedge funds have resumed shorting the euro in recent weeks as expectations of a diverging trend in economic growth, and consequently interest rates have encouraged investors to borrow euros and invest the proceeds in US dollars.

More news: LA Rams WR Cooper Kupp has torn knee ligament, McVay says

The euro was knocked back by concerns about Rome's tussle with the European Commission over its 2019 budget and weakness in Italy's banking sector. The yen touched a six-week low of 114.20 on Monday.

Sterling also jumped as high as $1.2929 from around $1.2870 before Lidington's comments, up more than half a percent on the day.

The index that tracks the dollar versus the euro, sterling, yen and three other currencies.DXY was 0.15 percent lower at 97.397, easing below a 16-month high of 97.693 reached on Monday.

In Europe, fears about a no-deal Brexit and a growing rift over Italy's budget put pressure on the euro and the pound.

Tuesday is the deadline for Italy to resubmit its budget proposals to the European Union after a showdown between Rome and Brussels over the government's spending plans that has rattled bond markets and weighed on the single currency. Economists in a Reuters poll forecast it would hold steady at 4 percent. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.