Pound soars 2% as traders bullish on Brexit deal

The pound bounded for the second day in a row Friday as traders reacted with vigour to news that Prime Minister Boris Johnson and Irish Taoiseach Leo Varadkar had found a “pathway” to a Brexit deal.

The pound was up around 2.2 cents, or 1.9%, against the US dollar, to 1.2660. It marks a nearly 4% rise since before the two leaders met on Thursday afternoon.

Against the euro, the pound rose 1.4% to 1.1453.

European Council president Donald Tusk lit a fire under the currency on Friday afternoon, saying he had seen “positive signals” from the meeting.

His statement “in and of itself sent sterling stratospheric”, said Connor Campbell, a financial analyst at Spreadex.

However, Mr Campbell said, the pound was rebounding from a five-week low on Thursday, and traders could be in for a shock next week.

“With the currency getting a bit carried away in the last 24 hours, next week really needs to deliver the goods if the pound isn’t to suffer a nasty, nasty comedown,” he said.

Boris Johnson said on Friday afternoon: “I had a good conversation with the Irish Taoiseach Leo Varadkar yesterday and I think both of us can see a pathway to a deal, but that doesn’t mean it’s a done deal.”

But Michael Hewson at CMC Markets warned that market optimism could be short-lived.

“We’ve been here so many times before this optimism needs to be tempered by the fact that any deal would have to be approved not only by the EU, but by MPs here as well, and MPs track record on agreeing on anything in recent months hasn’t been particularly great,” he said.