LONDON, Dec 9 — Sterling rose against a broadly weak dollar today after three days of losses as British Prime Minister Boris Johnson headed to Brussels for dinner with European Commission President Ursula von der Leyen in a last ditch attempt to avoid a no-deal Brexit.
With only days to the end of the Brexit transition period, traders are hopeful that a face-to-face meeting between UK and European Union leaders can break the deadlock.
In a week marked with high volatility, the British currency fell to a near three-week low on Monday as leaders failed to resolve their differences in the broader trade talks, raising concerns of a no-deal Brexit.
But yesterday offered a glimmer of hope when Britain said it would drop clauses in draft domestic legislation that breach the Brexit Withdrawal Agreement after reaching an “agreement in principle” with the EU over a sticky negotiating point.
The British currency rose 0.5 per cent against the dollar today in volatile trading at US$1.3433 (RM5.5) in early London trading, heading towards a 2-1/2 year high of above US$1.35 hit last Friday.
Against the euro, sterling was 0.4 per cent higher at 90.27 pence, after falling to a seven-week low on Monday.
But in a sign that the latest markets moves were more of an indicator of panicky trading, overnight implied volatility gauges—a measure of expected price swings—rose to close to 25 per cent, touching the highest point since late March.
“The jump in implied volatility does suggest there has been a fall in confidence regarding the prospects for a deal,” said Jane Foley, head of FX strategy at Rabobank.
“That said, after the recent selling pressure on the pound, some speculators are clearly viewing PM Johnson’s trip to Brussels in a positive light and are reducing short positions,” she added.
Ahead of the meeting in Brussels, one of PM Johnson’s most senior Brexit-supporting ministers, Michael Gove, told BBC radio today that Britain sees scope for a compromise on some of the sticky negotiating points.
German Chancellor Angela Merkel said the EU and Britain could still reach an agreement on a Brexit trade deal but added that she could not guarantee there would be a breakthrough at an EU summit tomorrow.
“The ‘now or never’ moment is here,” said ING analysts in a note to clients. “The meeting will tell us a lot”. — Reuters
