Pound shoots above $1.22 on Brexit deal hopes

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
UK's prime minister Boris Johnson, right, and German chancellor Angela Merkel shake hands at the Chancellery in Berlin, Germany. Photo: Axel Schmidt/Reuters

Sterling shot higher against the euro and dollar on Thursday, after comments from German leader Angela Merkel sparked hopes that a no-deal Brexit could be averted.

“One should say it can be done by October 31,” Merkel said on Thursday. “It’s not about 30 days, that was supposed to be allegorical to mean it can be done in a short time period, because the UK have said they want to leave the EU by October 31.”

The German chancellor said an alternative to the Irish backstop must be worked out “in the next 30 days” after a meeting with UK prime minister Boris Johnson on Wednesday.

Her use of the word “should” on Thursday suggested a more conciliatory tone and sparked hopes that a deal could be reached to avoid a no-deal Brexit.

The pound was up by 0.8% against the dollar to $1.2237 (GBPUSD=X) and up by 0.7% against the euro to €1.1026 (GBPEUR=X) at 2.50pm UK time – putting the sterling at a one-month high against both the dollar and the euro.

Michael Hewson, chief market analyst at CMC Markets, said the sharp rise was due to “a few stops getting triggered as a result of the more conciliatory tone from Merkel and Macron over looking at Irish backstop alternatives.”

French leader Emmanuel Macron backed Merkel’s comments, saying: “We should all together be able to find something smart within 30 days if there is goodwill on both sides.”

“Language from all politicians [over] the last few days seems a lot more open to compromise,” said a London market maker told Yahoo Finance UK.

Johnson met with Macron on Thursday in a bid to try and convince him to ditch his support for the Irish backstop. All three European leaders will meet again over the weekend at the G7 summit in Biarritz in the South of France.