Sterling neutral as traders hope for Brexit trade deal

Sterling neutral as traders hope for Brexit trade deal

20 Oct 2020 02:24 PM

Sterling traders kept the currency afloat on Tuesday as they searched for clues on how likely it was for Britain to reach a trade deal with the European Union by the end of the year.

Price actions suggest investors lean towards a scenario where both parties eventually will agree on some sort of a deal, as they did last year over the divorce agreement.

Sterling was last trading flat both against the U.S. dollar at $1.2944 and against the euro at 90.98 pence.

So far this month, Brexit-induced volatility has left minimal mark on the price of the pound, which on a month-to-date basis, remains little changed.

However, traders were bracing for volatility as they bought more protection in the options market. Options costs highlighted that implied volatility rose to nearly 12%, a more than two-month high.

On Monday, Britain said it saw no basis to resume trade talks with the EU unless there is a fundamental change in approach from Brussels.

Talks halted last week as Prime Minister Boris Johnson said there was no point in continuing them, cancelling an in-person meeting. Discussions still were held over the phone, but negotiations have not resumed yet officially.