Pound to euro exchange rate climbs as Brexit talks near end
As of this morning, sterling is valued at $1.37 – a sure-fire indication of restored confidence. The value of the pound has increased by 0.3 percent against the dollar since trading got underway this morning. Separately, the FTSE 100 likewise rocketed to a nine-month high off the back of optimism about the COVID-19 vaccine.
The boost is especially significant because it marks the first day of trading since the end of the transition period which saw the UK sever its ties with the bloc.
The pound is also up by 0.5 percent against the Euro, at 1.1168.
The uptick since the start of trading is likely to be a delayed reaction following the confirmation of the agreement on Christmas Eve.
The FTSE 100 rose by more than 200 points in its first day of trading since the end of the transition period.
Pound Sterling is at its highest value against the dollar in three years
Boris Johnson’s trade deal was confirmed on Christmas Eve
The increase of more than three percent was mirrored by rises of 1.9 percent and 1.3 percent respectively in the French and German main indexes.
George Vessey, Currency Strategist at Western Union, said: “Sterling enjoyed a couple of weeks of strengthening following the confirmation of a UK-EU trade pact last month, but attention now centres on the fight against the fast-spreading coronavirus and the social and economic repercussions of stricter lockdown measures.
“Despite securing an historic post-Brexit trade deal with the EU and avoiding a potentially chaotic impact on international trade, Mr Johnson’s premiership is being increasingly defined by the government’s response to the pandemic.
“All eyes are on the vaccine rollout results over the next few weeks and months, which should drive market sentiment and sterling’s direction.”
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The pound’s value against the dollar this morning
Elias Haddad, Senior Currency Strategist at CBA, predicted the currency could tick up still higher.
He said: “GBP/USD can trade closer to 1.4000 over the next few months following the Trade and Cooperation Agreement between the EU and the UK.
“GBP/USD is deeply undervalued relative to real interest rate and price deflator differentials.”
Andrew Spencer, a Reuters market analyst, added: “The broad USD downtrend looks set to initially extend as resilient risk sentiment reduces the dollar’s safe-haven appeal, providing underlying support for GBP/USD.”
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Boris Johnson and European Commission President Ursula von der Leyen in Brussels last month
Optimism has been fuelled by the rollout of the Pfizer vaccine
However, Ranko Berich, Head of Market Analysis at Monex Europe, suggested the impact was in fact not as profound as had been expected.
He said: “The uninspiring sterling reaction to confirmation of a trade deal is looking like a classic case of ‘buy the rumour, sell the fact’.
“After weeks, months, and years of back-and-forth, it seems the confirmation of the deal was mostly as expected by markets and as such is not a game changer for sterling.
“Other factors, most importantly Covid-19, will now once again begin to drive the outlook for the Pound.”
Brexit became a reality on December 31
The last time the pound hit its current value was in early 2018.
The four years since the 2016 referendum have been a time of uncertainty for the UK, a fact reflected in the Pound’s relatively low value during this period.
Reflecting the pound’s resurgence, British shares jumped on Monday in the first trading session of the new year in response to optimism around vaccine rollouts and a jump in oil prices.
Ladbrokes owner Entain surged 26.2 percent to be the top gainer on the FTSE 100 after saying it received proposals from US casino operator MGM Resorts for a possible offer.
Pound sterling rises against euro following decline
The blue-chip FTSE 100 rose 1.7 percent on its first day of trading since Brexit was finally delivered. The mid-cap index jumped 1.3 percent.
However, limiting gains was Mr Johnson’s admission on Sunday that tougher lockdown restrictions were probably on the way as COVID-19 cases keep rising.
Plumbing parts distributor Ferguson Plc gained 0.2 percent after it agreed to sell its UK-focused business to private investment firm Clayton, Dubilier & Rice for about £308 million.
Drugmaker AstraZeneca jumped 1.3 percent after Britain was set to roll out its low-cost and easily transportable COVID-19 vaccine, the second vaccine candidate to be distributed.