LONDON: Having taken a dive after Brexit negotiators admitted to being in deadlock yesterday, the pound bounced back against both the dollar and the euro this morning – although that drove the FTSE 100 off recent highs.
The pound was up 0.4 per cent against both the dollar and the euro in early trading, at $1.3313 and €1.1260 respectively, after a report in German newspaper Handelsblatt suggested the EU is prepared to offer the UK a two-year transitional deal as long as it gives up its voting rights.
Sterling’s strength meant the FTSE 100, which closed at a record high last night, fell 0.4 per cent to 7,527 points.
The index was pushed lower by engineering group GKN, whose shares were down 5.3 per cent at 334p after it brought a trading statement forward to warn on profits.
Experian, EasyJet and RELX were also among the biggest fallers, dropping 2.2 per cent, 1.5 per cent and 1.4 per cent respectively.
“[The Handelsblatt report] isn’t exactly a fresh take; a transitional period has been batted about since Brexit day dot,” said Connor Campbell, financial analyst at SpreadEx.
“And Barnier wasn’t actually that much of a doomsayer on Thursday, stating his belief that ‘decisive progress’ was within reach in the next 2 months. But investors are being selective in what Brexit news they want to listen to, with this report sending sterling sharply higher.”
However, he added sterling’s gain could be reversed later today.
“It’ll be interesting to see if the gains against the dollar can last all day given that this afternoon is expected to bring with it a particularly hawkish pair of US inflation and retail sales readings.”