On Tuesday, sterling climbed to an eight-day high against the euro as the political doubt in Germany maintained pressure on the single currency while optimism on Prime Minister Theresa May’s Brexit bill supported the pound.
On Monday, May mets with senior members of her ministerial team amidst anticipations of offering European Union more than what was committed to during a speech in September that failed to provide a breakthrough in the halted negotiations. According to sources, the ministers agreed to make an offer which would increase May’s existing commitment and investors believe this was holding back the British currency from making gains.
“It’s not a done deal yet by any means. I remain pessimistic and think there could be significant disappointment that would lead to a lower pound,” said global strategist Marshall Gittler .
With the euro under pressure from Germany’s unsuccessful alliance talks, reporting its largest drop against the dollar in a month this Monday, sterling added to the previous gains generating another 0.2 percent to 88.43 pence.
The euro has lost nearly 2 percent versus sterling over the past few days. Currency strategist Neil Mellor believes that political risk was now the motivating factor across all major currencies stating, “That the market is being driven solely by political considerations is supported by the recent slide in euro/sterling,”.
Mellor added, “That move that is suggestive of the market’s more optimistic — or less pessimistic — take on Brexit-related risks, following the expectation and confirmation that Theresa May is upping her Brexit divorce offer with the full backing of Cabinet”.
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May has continues to indicate she will increase the original 20 billion euro offer, but 40 billion euros would be worth only two-thirds of what Brussels wants. Against the dollar, sterling was flat at $1.3233, showed gains around 1 percent during the past week.