The pound spiked this morning as embattled Prime Minister Theresa May took a major step forward in securing Britain’s future relationship with the EU in Brussels.
European Council President Donald Tusk said the ‘future framework’ outlining terms of a trade deal had been agreed by negotiators this morning.
He announced that the text had been agreed in draft form by EU and UK negotiators and ‘agreed in principle at political level.’
How the pound has traded against the euro in the last five days.
That clears the way for a special Brexit summit to go ahead in Brussels on Sunday, when leaders of the 27 remaining EU states are expected to give their stamp of approval to the deal.
Against the euro, the pound is up 0.68 per cent to €1.1298, while against the US dollar sterling is currently up 0.98 per cent to $1.2893.
Today’s draft political declaration on the future relationship between the UK and the EU foresees a free-trade area with deep regulatory and customs cooperation.
The draft statement, which comprises 26 pages, sets out the structure for the future UK/EU relationship, which will be fully negotiated after the UK exits on 29 March.
The Prime Minister is now due to make a statement to MPs at 3pm as she launches an all-out drive to get the package through Parliament. The Pound surged on the news.
Commenting on the pound’s movements, Simon Harvey, an analyst at Monex Europe, said: ‘This week ’s lull in news flow has finally been broken, but sterling still faces a difficult few days. Questions regarding May’s ability to navigate her draft deal through Parliament and whether all EU countries will sign off on the deal remain, along with the likely Brexiteer reaction.
‘This has undoubtedly capped sterling’s kneejerk reaction this morning. However, the reaction itself is more telling than its magnitude. Optimism still remains in the market and sterling’s ability to explode at the blink of an eye is captivating.’
Currency matters: The pound is marching ahead this morning as embattled Prime Minister Theresa May took a major step forward in securing Britain’s future relationship with the EU
Hamish Muress, currency analyst at OFX, said: ‘Reports this morning that the EU have agreed to a draft deal on future trade relations has seen sterling bounce, but the currency is still much weaker than it was 8 days ago, before Raab’s surprise resignation.
‘The post Brexit trade relationship has been pushed to one side over the last few weeks as focus shifted to the backstop issue in Ireland, as issue that remains a stumbling block for Theresa May. ‘
While the pound is up when pitted against other currencies, it is a different story for the FTSE 100 today. The blue-chip index is currently down 1.33 per cent or 94.12 points to 6,956.11.
The FTSE 250 index, which is often seen as providing a more accurate insight into the health of the economy, is down 0.48 per cent to 18,496.25.
Earlier this month, the pound slumped as Theresa May struggled to cobble together support for the 585-page draft agreement documenting the UK’s future relationship with the EU.
A string of high-profile resignations, including Brexit Secretary Dominic Raab and Work and Pensions Secretary Esther McVey, exacerbated the pound’s decline.
The pound plunged by 1.5 per cent against the dollar to below $1.28 after the shock resignations.
Bank of England governor Mark Carney asked major UK banks to talk to City regulators and give their feedback on the market reaction to the shock ministerial resignations.
Pound reaction: The pound rose sharply against the US dollar amid today’s Brexit news