Sterling extended gains on Thursday amid expectations a long-elusive Brexit deal was imminent, raising hopes the UK can avoid a turbulent economic rupture on New Year’s Day.
The dollar was on the back foot in holiday-thinned trading as hopes for an agreement that would protect some $1 trillion in annual cross-channel trade from tariffs and quotas sapped demand for the safest assets.
The British pound strengthened 0.2% to $1.3525 early in the Asian day after surging 0.9% in the previous session to snap a three-day losing streak.
The dollar index was at 90.255 following Wednesday’s 0.3% slide. The euro strengthened 0.1% to $1.22025, adding to a 0.2% gain overnight.
The riskier Aussie dollar traded at 75.802 U.S. cents following the previous session’s 0.8% jump.
“This time it really does appear that a deal will be struck just in time for Christmas,” Westpac macro strategist Tim Riddell wrote in a client note dated Dec. 24.
“If a deal does transpire on 24th December, GBP is likely to make further gains” toward $1.40, “but potential for a more substantial move towards 1.4500 now seems unlikely given how positions exhaustion is so prevalent.”