Pound Higher On Brexit Deal Hopes

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The pound drifted higher against its major counterparts in the European session on Thursday, as investors focused on ongoing talks in Brussels to finalize a trade deal between the U.K. and the European Union before the transition period.

The U.K. and the EU negotiators are in the final stage of talks to reach a post-Brexit trade deal before the end of this year.

U.K. home secretary Priti Patel said that negotiators were working “flat out” to secure a deal, but the government would not compromise the independence or sovereignty of the UK.

“We are in that tunnel of negotiation and our teams continue to work incredibly hard,” she added.

Policymakers of the Bank of England unanimously decided to retain the record low UK interest rate and quantitative easing amid uncertainty over the post-Brexit trade deal.

The nine-member monetary policy committee voted to hold the interest rate at 0.10 percent and the quantitative easing at GBP 895 billion, as widely expected.

The successful trialling of some Covid vaccines and initial plans to roll them out widely over the first half of next year is likely to reduce the downside risks to the economic outlook than previously assessed.

The pound advanced in the Asian session, on hopes of progress in Brexit talks to strike a trade deal between the U.K. and the European Union.

The pound strengthened to 1.2040 versus the franc, its biggest level since December 4. At Wednesday’s close, the pair was worth 1.1948. The pound is seen finding resistance around the 1.22 mark.

The Swiss central bank decided to maintain its negative interest rates to stabilize economic activity and price developments.

The Swiss National Bank retained the policy rate and interest on sight deposits at the SNB at a record low -0.75 percent, as widely expected.

The pound moved up to more than a 2-week high of 0.8982 against the euro from Wednesday’s closing value of 0.9028. Next key resistance for the pound is likely seen around the 0.88 level.

Final data from Eurostat showed that Eurozone consumer prices declined for the fourth straight month in November.

Consumer prices were down 0.3 percent on a yearly basis in November, the same rate of fall as seen in October and in line with the preliminary estimate published on December 1.

The pound remained higher against the greenback, at a 2-1/2-year peak of 1.3623. The pair had finished Wednesday’s deals at 1.3508. The pound is likely to face resistance around the 1.41 region, if it gains again.

The pound climbed to the highest level since December 4 versus the yen, at 140.40. The pair was valued at 139.74 when it ended trading on Wednesday. Further rally in the pound may face resistance around the 144 level.

Looking ahead, the U.S. weekly jobless claims for the week ended December 12 and housing starts and building permits for November are scheduled for release in the New York session.

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