LONDON: Sterling retreated from session highs on Thursday to hold below the $1.36 mark as news of the eleventh hour UK-EU trade deal confirmed markets’ expectations that an agreement was imminent.
In thin Christmas Eve trading, sterling was up just 0.3% on the day by 1630 GMT, having earlier risen to $1.3618 - just shy of last week’s 2-1/2-year high. Against the euro too it stood 0.2% firmer at 90.01 pence.
Sterling had strengthened more 1.5% versus the dollar since Reuters reported at around 1330 GMT on Wednesday, quoting sources, that a Brexit deal appeared imminent. But investors and analysts have long been convinced a trade deal would be done to prevent Britain casting off into the unknown on Jan. 1. Market focus will now turn to the deal’s nitty-gritty with more talks inevitable in 2021 to thrash out details. “It was quite likely to happen today, but the deal looks very very skinny and sterling is now in ‘buy the rumour sell the news’ mode,” said Marija Vertimane, senior strategist at State Street Global Markets.
Option market gauges also calmed.
One-week implied volatility, a gauge of expected swings, slipped to its lowest level since late November at 7.95%. It is down more than 7 percentage points since the first report of an imminent Brexit deal emerged on Wednesday.
Meanwhile, US-listed iShares MSCI United Kingdom ETF turned negative after opening 0.2% higher.—Reuters
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