Sterling Climbs 1% on Progress in Post-Brexit Trade Talks

The British pound sterling rose nearly 1% on Wednesday after the UK and the European Union (EU) said they had made progress in trade talks this week.

Prime Minister Boris Johnson's spokesperson said today that disagreements remain, reiterating that the main debate between the two parties have been over fisheries, equal opportunity, and fair competition.

Also, the sterling rose after reports  that UK and the EU are ready to extend Brexit talks beyond the mid-October deadline.

The British pound was last up 0.9% to $1.3052, after touching a one-week low of $1.2865 earlier in the session due to uncertainty over whether talks would extend or not.

The sterling rose 0.7% against the euro to 90.11 pence after hitting a five-day low of 91.21 pence in the morning session.

"A fundamental deal on commodity trade will be struck by the end of October, which could push the British pound up to $1.34," said Simon Harvey, a currency analyst at Monex Europe.

Harvey added, "The United Kingdom will not deviate from the table in the absence of a formal agreement before tomorrow's summit."

"The EU summit will remain pivotal for the pound, despite this more optimistic tone, as the currency has begun to become very sensitive to Brexit headlines again," he pointed out.

Meanwhile, implied volatility of the pound briefly recorded a seven-month high of more than 13%, indicating that investors were bracing for sharp moves in the currency.

UBS economist Dean Turner said, "it is in neither side’s interests not to have a deal.”

However, any deal is likely to be far from what analysts had initially hoped for, limiting gains for the pound even if the deal was signed.

The UK withdrew from the bloc in January, and a stalemate on their current relationship expires on December 31. The two parties had set the EU summit this week in Brussels as the deadline for reaching a Brexit deal.