Sterling gains, dollar walking amid hopes that Reuters’ Brexit deal is imminent

© Reuters. Pound and US dollar banknotes can be seen in this illustration

By Kevin Buckland

TOKYO (Reuters) – The pound sterling expanded its gains on Thursday as an elusive Brexit deal was expected to be imminent, raising hopes that the UK can avoid a tumultuous economic break on New Years Day.

The dollar lagged behind in vacation dilution trading in hopes of a deal that would protect roughly $ 1 trillion in annual cross-channel trading from tariffs and quotas that weighed on demand for the safest assets.

The British pound gained 0.4% to $ 1.3546 in Asian hours after rising 0.9% in the previous session to spark a three-day losing streak.

The value was 90.233 after falling 0.3% on Wednesday. The euro gained 0.1% to $ 1.22030 which resulted in a 0.2% gain overnight.

While there was no official confirmation from either side that the month-long negotiations were over, a senior UK government source said Prime Minister Boris Johnson was ready to conclude a trade deal with the EU after media reports said the deal was already done.

An EU executive source said talks were still ongoing and another UK government source was also cautious and said the negotiations were still ongoing.

“This time around, it really seems like a deal will be closed in time for Christmas,” Westpac macro strategist Tim Riddell wrote in a December 24 customer announcement.

“If a deal hits December 24th, GBP is likely to see further gains” towards USD 1.40 “but the potential for a more substantial move towards 1.4500 seems unlikely given the widespread depletion of positions. “

Brexit headlines overshadowed U.S. President Donald Trump’s call for changes to a coronavirus-assisted bill and threatened the government to shut down next week.

The yen, another port currency, was barely changed at 103.56 per dollar. Bank of Japan Governor Haruhiko Kuroda said Thursday the central bank is ready to take new steps to make its massive monetary easing more effective and sustainable.

The riskier dollar was trading at 75.797 cents after jumping 0.8% in the previous session.

The greenback fell 0.1% in the offshore market to 6.5204 Chinese yuan. The owner changed hands at 6.5325 per dollar.

The dollar index is down more than 6% this year as investors bet the US Federal Reserve will keep its monetary policy extremely accommodative and fiscal stimulus will accelerate an economic recovery in 2021. The expectation of a further decline in the dollar is helping to revive equity markets in emerging market currencies.

“The fact that stock indices traded mostly in the green this morning reflects the consensus expectation that Trump will legally sign the budget – although he could wait until the eleventh hour,” wrote Jane Foley, senior FX strategist at Rabobank in London, on Wednesday in a research note.

“If this doesn’t happen, the USD could benefit from buying a safe haven,” but in the longer term the US currency will weaken to $ 1.23 per euro over the next year, she said.

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