The pound jumped in value against the dollar and the London stock market edged higher as investors were cheered by hopes of a deal in the UK’s trade negotiations with the EU.
The EU’s chief negotiator, Michel Barnier, said on Monday he believed a Brexit trade agreement was possible now the remaining disputes had been whittled down to only two.
The pound jumped more than 1% against a weakening dollar to hit $1.34, reversing much of the losses seen last week when investors feared Brexit talks would break down and the UK was on course for leaving the EU without a deal.
Sterling, which was worth almost €1.40 five years ago, gained 1% on the day against the euro to nudge above €1.10.
Britain’s FTSE 100 edged 0.2% higher to 6,557, while continental stock markets, also buoyed by the news, made gains, with the Cac 40 in Paris rising 1% to 5,562 and the German Dax picking up 1.1% to 13,262.
Analysts said the FTSE had been on course for a bigger rise until investors began to sell AstraZeneca stock after poor reviews for its planned $39bn takeover of the US biotech firm Alexion.
US markets looked set for gains, with the forecasts for the S&P 500 showing shares up 0.5% and the Dow future 0.7% higher. Investors expect Congress to give the green light to a second large stimulus package to protect households and businesses from the ravages of the pandemic going into the winter months.
Wall Street is also waiting for a special election in Georgia in early January, which could potentially switch the balance of power in the US Senate.
Barnier said that the nine-month negotiations with the UK had come down to finding settlements on fair-competition rules and fishing rights, and appeared to contradict Boris Johnson, who said a gulf remained between the sides when talks were adjourned on Sunday night.
Both sides are teetering on the brink of a no-deal Brexit departure. They have committed to a final push in talks in the run-up to 31 December, when a transitional period following the UK’s departure from the bloc is to end.
Marking a turnaround in sentiment from the fears of a no-deal Brexit that characterised last week’s news agenda, Brent crude, the international oil barometer, picked up 63 cents to $50.60 per barrel.