Today, the value of the sterling rose above $1.30, hitting a two-week high. It comes after media reports that the tone of Brexit negotiations between the government of the United Kingdom and the main opposition party had some progress.
Various British journalists reported today that Theresa May, the Prime Minister of the United Kingdom, is seeking a consensus with the Labour Party to get a Brexit deal approved and wants the negotiations to reach a conclusion by the middle of next week.
The value of the pound rose to as high as $1.3049, with broad dollar weakness and some changes to its end-of-month portfolio by asset managers which are cited as possible reasons for the move that comes alongside the Brexit-related optimism.
Last week, the British currency had dropped to a two-and-a-half-month low as the dollar surged and concerns mounted regarding a deadlock in the negotiations over the terms of the exit of the United Kingdom from the European Union.
However, today, the Times newspaper, citing unidentified Labour sources, reported that the government of PM May has made substantive moves in the Brexit negotiations with Labour.
The chief Brexit negotiator of the European Union said that the bloc is hoping that the two biggest political parties in the United Kingdom will be able to reach an agreement on Brexit this week, possibly including membership in a customs union.
Last year, PM May agreed on a withdrawal deal with the European Union, however, it was rejected three times by a deeply divided UK parliament. That delayed the exit date, a postponement that has heavily weighed on the pound as the investors fret about prolonged political uncertainty.
The pound was on track for its largest daily gain in more than a month versus the dollar, increasing by 0.8 percent to $1.3047 and 0.6 percent to 85.91 pence against the euro.
Last week, Sterling traded as low as $1.2851 as the dollar rose towards two-year highs, measured against a basket of currencies.
In a note, Nordea analysts stated: “May is still under pressure to pass her deal; however, we don’t see a breakthrough anytime soon.”
They added: “Instead, we expect May to be ousted over the summer, leading to another extension beyond October 31. This postpones a BoE (Bank of England) hike and should weigh on GBP.”