FX round-up: Pound finishes volatile session flat, EM FX finds respite
By Alexander Bueso
Date: Wednesday 05 Sep 2018
(Sharecast News) - Sterling rocketed on Wednesday after Bloomberg reported that Germany and Britain were now both prepared to accept a less detailed agreement on the UK's future economic and trade ties with the European Union, hopefully leaving a deal on the Irish backstop as the last remaining bone of contention.
Nevertheless, given recent volatility in the pound on the back of headlines around Brexit, some analysts cautioned about reading too much into any headline, especially as Germany alone did not set policy for the entire EU.
Thus, as of 1720 BST the pound was just 0.05% ahead against the single currency to 1.1104, versus an intra-day high of 1.1166.
The picture was slightly improved when looked at against the US dollar, with the pound rising 0.43% to 1.2910, but also well off its intra-day high of 1.2984.
"If both sides are prepared to blink in order to avoid a no-deal outcome, with all this entails, then sanity may prevail. Perhaps the best strategy was to get past the actual deadline, and then accept that things would carry on broadly as normal until a sensible deal could be arranged," said IG's Chris Beauchamp.
"Still, those sterling bears that fled last week on the Barnier comments were proven wrong, and more than a few will be taking the 'once bitten, twice shy' approach here - these signs of German conciliation could easily be contradicted soon enough."
For its part, the US dollar was moving lower against the currencies of its two major trading partners, dipping by 0.21% to 6.83 against the yuan, while euro/dollar was advancing 0.35% to 1.16222.
Triggering the move in the single currency, towards the middle of the session, perhaps the most outspoken proponent of fiscal largesse in Italy, deputy prime minister, Luigi di Maio, said that the upcoming 2019 budget Law would be "courageous" but keep state accounts in order.
In the background meanwhile, the Argentine peso and Turkish lira were both making slight inroads against the Greenback.
Russia's rouble on the other hand was not, with the US dollar adding 0.04% to 68.2130 after Westminster charged two Russian military intelligence officers with the attempted assassination last March of ex-spy Sergei Skripal.
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