Barnier sends sterling to a 5-week high on Brexit deal hopes
* Barnier says Brexit deal possible in 6-8 weeks
* Pound at five-week high vs dollar, one-month high vs euro
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
LONDON, Sept 10 (Reuters) - Sterling surged against the
dollar and euro on Monday after the European Union's chief
negotiator said a Brexit deal was possible "within six or eight
weeks" if negotiators were realistic in their demands.
For the second time in less than a week, Michel Barnier has
signalled his desire to move ahead on the Brexit negotiations,
less than seven months before the United Kingdom is slated to
leave the European Union on March 29, 2019.
Barnier, the EU's chief negotiator, told a forum in Slovenia
that "if we are realistic, we are able to reach an agreement on
the first stage of the negotiation, which is the Brexit treaty,
within six or eight weeks."
For a market broadly short on the pound because of worries
that Britain will crash out of the EU next year without any sort
of formal trading arrangement, Barnier's comments were seized on
as signalling that the UK may avoid a disorderly no-deal Brexit.
The British currency rallied across the board, rising more
than one percent to $1.3052, its highest level in five
weeks. It later settled at $1.3021, up 0.8 percent on the day.
The pound also rose to a one-month high against the euro at
88.96 pence while versus the Swiss franc
it was headed for its biggest one-day rise in more than 18
"It just shows that's the key thing that people want to see
-- Brexit progress. You have a market that's heavily short on
sterling due to Brexit. It needs that tail risk to be taken off
before sterling can rally," said Viraj Patel, a currency
strategist at ING in London.
Also on Monday diplomats and officials said EU leaders were
likely to hold a special Brexit summit in mid-November when they
hope to be able to sign off on a divorce deal with Britain.
Data earlier on Monday showed British gross domestic product
in the three months to July was 0.6 percent higher than in the
previous three-month period, at the top end of forecasts.
Sterling has rallied in recent weeks off lows below $1.27,
lifted by recent seemingly favourable comments from Barnier
about moving towards a deal.
"Any scope for a deal to be achieved, particularly coming
from one of the chief negotiators, is a bullish signal," said
Craig Erlam, market analyst at OANDA.
Sentiment, however, was hit earlier on Monday by warnings
from a British former junior minister, Steve Baker, that the
ruling Conservative Party could face a split if Prime Minister
Theresa May persisted with her Brexit blueprint, known as the
Baker said 80 or more lawmakers were prepared to vote
against the plan.
The comments, indicating the level of opposition within
May's party, came a day after former foreign minister Boris
Johnson described part of the plan as "a suicide vest".
"Westminster is going to be a cloud over sterling before the
Tory conference," ING's Patel said, referring to May's party
gathering starting on Sept 30.
Headlines on the progress of Brexit negotiations have forced
traders to switch positions rapidly in a market that is holding
about $5.5 billion in short positions on the pound, based on
weekly futures positioning data.
Reuters polls show sterling rising as much as six percent in
a year, but a Brexit without any deal between London and
Brussels could push it as much as eight percent lower from
(Reporting by Saikat Chatterjee and Sujata Rao
Additional reporting by Abhinav Ramnarayan
Editing by Peter Graff and Gareth Jones)
First Published: 2018-09-10 10:35:25
Updated 2018-09-10 18:16:27
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