The pound rose yesterday to its highest in a week as traders bet that Prime Minister Theresa May’s decision to take control of Brexit negotiations would make it easier to agree a divorce deal with Brussels.
With less than nine months before Britain is due to leave the European Union and May’s own Conservative Party still divided about what sort of trading relationship with Brussels to seek, Brexit talks remain a headwind for the pound.
May said on Tuesday that her office would now lead Brexit negotiations rather than the dedicated Brexit ministry, giving the currency a boost.
Rising expectations of a Bank of England interest rate rise – the market is currently pricing in an 86 percent chance of a 25-basis point increase at next week’s monetary policy meeting – have also helped the currency off 10-month lows hit last week.
The euro held its own as concerns about a global trade war eased after the United States and the European Union agreed to begin talks on lowering tariffs.
Following talks on Wednesday with European Commission President Jean-Claude Juncker, U.S. President Donald Trump said they had agreed to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.”