Pound Soars as EU announces Brexit Transition Deal

Sterling surged on Monday after the European Union said it had agreed to grant London a status-quo transition after it exits the bloc next year, until the end of 2020.

Michel Barnier, the EU’s chief negotiator, said the EU and Britain had agreed a transition deal and had also agreed that a backstop solution on border arrangements for Ireland must be part of a legal text of the Brexit treaty .

The pound, already up against the dollar and euro, as expectations of the deal rose, gained further after the announcement. Against the dollar, it rose as much as 1 percent to $1.4088, its strongest since Feb. 16 and the biggest one-day rise since January.

British government bond prices fell and the yield on the two-year gilt – which is most sensitive to Bank of England interest rate decisions – hit a new high since the June 2016 referendum at 0.863 percent.

A transition Brexit deal has been widely seen as paving the way for a BoE rate hike in May.

Yields on safe-haven euro zone bonds too rose after the announcement, with Germany’s benchmark 10-year bond yield up 2 basis points at 0.59 percent – a session high.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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