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Pound surges on report Brexit deal could come 'today or tomorrow'

Ireland's Prime Minister Micheal Martin speaks as he arrives for an EU summit at the European Council building in Brussels, Thursday, Dec. 10, 2020. European Union leaders meet for a year-end summit that will address anything from climate, sanctions against Turkey to budget and virus recovery plans. Brexit will be discussed on the sidelines. (John Thys, Pool via AP)
Ireland's prime minister Micheal Martin speaks as he arrives for an EU summit at the European Council building in Brussels, 10 December 2020. Photo: John Thys, Pool via AP

The pound leapt higher on Wednesday afternoon, boosted by hopes that a Brexit trade deal could be announced before Christmas.

Reuters quoted an unnamed EU diplomat as saying a deal was “pretty much there.”

“It’s a matter of announcing it today or tomorrow,” the diplomat said.

Bloomberg reported that negotiators had agreed the outline of a deal and were putting the “finishing touches” to an agreement.

The reports sent sterling surging. The pound was was up 1.3% against the dollar (GBPUSD=X) to $1.3524 and up 1% against the euro (GBPEUR=X) to €1.1087 by mid-afternoon.

The pound leapt against the dollar after the Bloomberg report. Photo: Yahoo Finance UK
The pound leapt against the dollar after the Bloomberg report. Photo: Yahoo Finance UK

Negotiators on the British side were more equivocal. A senior Downing Street source told the Press Association a deal was “possible but far from certain.”

Ireland’s prime minister Micheal Martin had struck a hopeful tone earlier in the day. He said EU leaders were on “stand by” to approve any Brexit deal in the coming days. Martin said he was hopeful a deal could be done.

“If you had a breakthrough tonight or tomorrow, officials in Europe could be working Christmas Day on the text,” he told Ireland’s RTE Radio One on Wednesday. “On balance, I think given the progress that has been made that there should be a deal.”

The UK and EU have just nine days to reach a deal before the end of the EU transition period. The EU’s chief negotiator, Michel Barnier, on Tuesday said talks were in a “crucial moment” and called for a “final push.”

UK housing secretary Robert Jenrick told Sky News on Wednesday he was “reasonably optimistic” about the prospect of striking a deal but said there were still “serious” issues to address.

“There is still the same serious areas of disagreement, whether that is on fisheries or the level playing field,” Jenrick said.

“We are working through those issues, our negotiators will keep going — the prime minister has been very clear that he is going to negotiate until the very end, which is 31 December, because that is the right thing, it is what the British public would expect.”

WATCH: UK reaches deal with France to allow hauliers to cross border

Marshall Gittler, head of investment research at BDSwiss Group, said: “The differences between the two sides seem to be narrowing down to fishing, and the amount of fish that they are haggling over is ‘minnow-scule’ — some estimates are that it comes down to around €30m (£27m, $36.6m) worth of fish, which is the going rate to transfer a football player from one team to another.”

Sterling was also helped by the reopening of the border between the UK and France. The two countries struck a deal to restart lorry traffic after the border was closed on Sunday for fear of importing a new strain of COVID-19. A mass testing programme for lorry drivers will be rolled out from Wednesday as part of a new protocol to restart the flow of trade.

“I think people are beginning to realise that a trade deal is the least of their worries,” Gittler said. “Deal or no deal there’s going to be chaos at the British borders from 1 January.”

The rise for sterling came despite new that much of the UK is set to follow London and the South East into lockdown-like ‘Tier 4’ restrictions on Boxing Day. UK health secretary Matt Hancock announced that large chunks of the south of England will face local lockdowns from 26 December.

WATCH: Why is fishing so important in Brexit talks?