Sterling Jumps on Reported Financial Services Brexit Deal


The British pound rallied Thursday on reports of a post-Brexit financial services deal, while U.S. stocks continued to rally.

Sterling surged to a one-week peak at $1.2977, even after officials said a final agreement had not been reached.

"November kicked off with the focus shifting back onto the pound, with the currency rocketing higher after the latest Brexit update," said Spreadex analyst Connor Campbell.

"The Times reported that Theresa May has tentatively reached a deal with the EU that would allow UK financial services firms access to European markets post-divorce."

British officials and the EU's chief Brexit negotiator Michel Barnier both later said agreement had not yet been reached on UK financial services retaining access to European Union markets after Brexit.

Barnier called the report misleading while British officials said good progress was being made although a deal hadn't been agreed.

Market analyst David Madden at CMC Markets UK said "the fact that (UK officials) didn’t completely dismiss the report suggests there is some truth to the article."

Gains by sterling were unaffected by the Bank of England keeping, as expected, its key interest rate at 0.75 percent, as well as trimming its growth forecast for next year when Britain exits the European Union.

 - Wall Street rallies -

Europe's stock markets ended the day mixed, with London's FTSE 100 dragged lower as oil stocks fell along with the price of crude.

However the rally in the U.S. continued unabated, with the Dow up 0.8 percent in midday trading. The broader S&P 500 added 0.7 percent and the tech-heavy Nasdaq Composite rose 1.1 percent.

"Signs that China could see further stimulus measures and reports of a Brexit breakthrough are likely helping foster the continued recovery," said analysts at Charles Schwab brokerage. 

Most Asian stock markets grinded higher Thursday, tracking Wall Street gains the previous day and a Chinese pledge to support the world's number two economy.

The healthy gains to kick off November come as dealers look to put behind them one of the worst months in recent years, which saw billions wiped from valuations and confidence battered in October.

"October was the worst month in six-years for global equities, and despite a 48-hour reprieve on the final two days of trading as investors balanced portfolios, November begins with regional bourses providing some mixed results," noted Oanda analyst Dean Popplewell.

The yuan languished at a 10-year low and approaching seven to the dollar as uncertainty about China's economy leads investors to take their cash out.

Crude oil prices tumbled as output from the United States and Russia remain high.

"At the same time, concerns about global growth persist, and dealers are worried about future demand," said Madden at CMC Markets UK.

- Key figures around 1630 GMT -

Pound/dollar: UP at $1.2970 from $1.2766 at 2100 GMT on Wednesday

Euro/dollar: UP at $1.1395 from $1.1312

Dollar/yen: DOWN at 112.72 yen from 112.94 yen

London - FTSE 100: DOWN 0.2 percent at 7,114.66 points (close)

Frankfurt - DAX 30: UP 0.2 percent at 11,468.54 (close)

Paris - CAC 40: DOWN 0.2 percent at 5,085.78 (close)

EURO STOXX 50: DOWN 0.03 percent at 3,196.61

New York - Dow: UP 0.8 percent at 25,316.92

Tokyo - Nikkei 225: DOWN 1.1 percent at 21,687.65 (close)

Hong Kong - Hang Seng: UP 1.8 percent at 25,416.00 (close)

Shanghai - Composite: UP 0.1 percent at 2,606.24 (close)

Oil - Brent Crude: DOWN $1.80 at $73.24 per barrel

Oil - West Texas Intermediate: DOWN $1.60 at $63.71