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The British pound was soaring against the U.S. dollar [s: GBPUSD] on Thursday after a report that the U.K. has reached a post-Brexit deal for the financial services sector.
The pound GBPUSD, +1.0966% shot to $1.2917 from $1.2767 late Wednesday, and is up about 1% on the session so far. Those gains came after the Times of London reported that government sources indicated a tentative deal had been reached to allow U.K. banks to keep operating in European Union markets even after Brexit goes through.
The pound, known as sterling, could continue to trade strongly, although further moves may be dependent on the Bank of England’s decision on interest rates scheduled for later in the day, said Peter Iosif, senior research analyst at IronFX, in a note to clients.
The Bank of England’s Monetary Policy Committee is widely expected to announce no change in key interest rates at its meeting Thursday, while investors will also get a look at the Quarterly Inflation Report. A rather tight labor market and high inflation rate could provide grounds for a more hawkish tone, while a rather low growth rate and Brexit uncertainty could advise caution,” said Iosif.
Sterling was coming off a strong day Wednesday when it shot higher after a letter by chief Brexit negotiator Dominic Raab was published in which he said he expected to reach a deal with the European Union by Nov. 21.
The strengthening of the pound came after a tough October, though. Brexit uncertainty took a toll on the pound, dragging it down 2% against the dollar for the month overall.
The ICE Dollar Index DXY, -0.56% was down 0.5%, largely due to losses against the pound, while the euro EURUSD, +0.6454% was also trading higher. The euro was last changing hands at $1.1378 from $1.1312 late Wednesday.
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