Pound Clips Weekly Loss Vs Euro and Dollar On Hopes of Brexit Breakthrough

Markets have feared a possible delay to the progression of talks, on to the subjects of trade and transition, beyond December. But Friday's statements suggest a breakthrough could be in the pipeline.

The Pound rose strongly during noon trading Friday, paring losses against both the Euro and US Dollar, after October’s EU summit concluded with some European politicians having adopted a more conciliatory tone on the subject of Brexit negotiations.

Donald Tusk, president of the European Council, told a press conference that reports of deadlock in the Brexit negotiations have been exaggerated.

“I may be a little more optimistic than Barnier on Brexit talks,” he added, after noting a renewed atmosphere of trust between the EU and the UK in the wake of October's talks. 

Markets have feared a possible delay to the progression of talks, on to the subjects of trade and transition, beyond December.

The Pound-to-Euro exchange rate rose more than 100 points over the course of Friday to trade back above the 1.1200 threshold, marking a session gain of 0.86% and reducing the week’s loss to 0.37%.

Any delay this point is seen as raising the risk of a so called “hard Brexit”, or a “no deal Brexit”, given the time it is likely to take to agree details of a “transition deal” as well as future trade terms.

“We hope that we can begin phase 2 of Brexit talks in December, but that depends on British movement on financial settlement,” says German Chancellor Angela Merkel.

The term British movement on financial settlement means Prime Minister Theresa May must agree to meet European financial demands.

The Pound-to-Dollar rate rose by more than 100 points from its session low to trade as high as 1.3200, marking a session gain of 0.26%, and reducing the week’s loss to -0.64%.

May reiterated her Florence promises that the EU will not suffer a budgetary black hole during the current spending period, as a result of Brexit, and that she will “honour our commitments”.

Continued contributions to the Brussels budget over the life of the current spending period are estimated to cost around £18 billion.

Friday’s statements from May appear to suggest she may now yield to European demands for money, despite previously having said such demands have “no basis in law”.

But not all of Europe’s national leaders were on the same page at the end of the summit, as France’s Emmanuel Macron was less conciliatory and got straight at the heart of the “deadlock”.

The Pound rose strongly during noon trading Friday, paring the week’s losses against both the Euro and US Dollar, after October’s EU summit concluded with some European politicians having adopted a more conciliatory tone on the subject of Brexit negotiations.

“I would say we are far from having reached the necessary financial commitments before we can open phase two,” he told the same news conference. "I can only underline how much work needs to be done."

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