Sterling jumps on reported financial services Brexit deal

LONDON: The British pound rallied Thursday on reports of a post-Brexit financial services deal as investors also awaited an interest rate decision from the Bank of England.

Sterling surged to a one-week peak at $1.2934 after the reports and the widely-expected decision by the Bank of England to hold UK interest rates steady.

"November kicked off with the focus shifting back onto the pound, with the currency rocketing higher after the latest Brexit update," said Spreadex analyst Connor Campbell.

"The Times reported that Theresa May has tentatively reached a deal with the EU that would allow UK financial services firms access to European markets post-divorce."

- 'Preliminary deal' -

London and Brussels have agreed a preliminary deal that would see UK financial services retain access to European Union markets after Brexit, the paper reported.

British and EU negotiators have struck a tentative agreement on all aspects of a future partnership on services and the exchange of data, The Times said, citing UK government sources.

Such a deal would guarantee British companies access to EU markets as long as domestic regulations remained broadly aligned with those set by Brussels.

However, analysts expressed caution over the latest reported development, which comes amid stalled trade talks before Britain's scheduled EU exit in late March 2019.

"This is a real positive as the UK is heading into the final stages of Brexit negotiations this month," noted analyst Stephen Hubble at global payments group Centtrip.

"However, agreeing a deal and setting out a legal trade agreement are very different things.

"No one will look for ways of making the life easy for the City of London, which is a UK financial-services spot coveted by other EU members."

- European equities mixed -

Europe's stock markets were mixed in afternoon trading.

London stocks won 0.2 percent, with gains slipping after the Bank of England kept its key interest rate at 0.75 percent and trimmed its forecast for growth next year when Britain exits the European Union.

In the eurozone, Frankfurt equities added 0.4 percent and Paris dipped less than a tenth of a percent.

Wall Street opened higher, with the down adding 0.5 percent in the first minute of trading.

"Signs that China could see further stimulus measures and reports of a Brexit breakthrough are likely helping foster the continued recovery," said analysts at Charles Schwab brokerage.

Most Asian stock markets grinded higher Thursday, tracking fresh Wall Street gains, following a Chinese pledge to support the world's number two economy.

The healthy gains to kick off November come as dealers look to put behind them one of the worst months in recent years, which saw billions wiped from valuations and confidence battered in October.

"October was the worst month in six-years for global equities, and despite a 48-hour reprieve on the final two days of trading as investors balanced portfolios, November begins with regional bourses providing some mixed results," noted Oanda analyst Dean Popplewell.

The yuan languished at a 10-year low and approaching 7 to the dollar as uncertainty about China's economy leads investors to take their cash out.

- Key figures around 1330 GMT -

Pound/dollar: UP at $1.2921 from $1.2766 at 2100 GMT on Wednesday

Euro/dollar: UP at $1.1389 from $1.1312

Dollar/yen: DOWN at 112.79 yen from 112.94 yen

London - FTSE 100: UP 0.2 percent at 7,141.67 points

Frankfurt - DAX 30: UP 0.4 percent at 11,487.12

Paris - CAC 40: DOWN 0.06 percent at 5,090.61

EURO STOXX 50: UP 0.3 percent at 3,207.91

New York - Dow: UP 0.5 percent at 25,229.40

Tokyo - Nikkei 225: DOWN 1.1 percent at 21,687.65 (close)

Hong Kong - Hang Seng: UP 1.8 percent at 25,416.00 (close)

Shanghai - Composite: UP 0.1 percent at 2,606.24 (close)

Oil - Brent Crude: DOWN 25 cents at $74.79 per barrel

Oil - West Texas Intermediate: DOWN 13 cents at $65.18