The pound rose sharply against the dollar and the euro on Thursday evening, driven by optimism that a Brexit deal may be reached before the October 31 deadline. Sterling gained up to 1.9% against the dollar, reaching around $1.24, and rose 1.5% against the euro to €1.13.
The surge followed a three-hour meeting between Prime Minister Boris Johnson and Irish Taoiseach Leo Varadkar at Thornton Manor in Cheshire. In a joint statement, the two leaders described the talks as 'detailed and constructive' and said they could see a 'pathway to a deal'. Officials will continue to engage constructively.
Market analysts attributed the pound's rise to increased confidence that a no-deal Brexit would be avoided. Fiona Cincotta of City Index noted that sterling remaining above $1.20 indicated investors were pricing in an extension rather than a no-deal scenario. The FTSE 100 was held back by the strong pound, which typically weighs on the index's export-heavy constituents.
The currency was also supported by better-than-expected UK GDP data. The Office for National Statistics reported that the economy grew by 0.3% in the three months to August, driven by a boom in television and film production, easing fears of an immediate recession.
Despite the positive tone, Varadkar cautioned that 'there is many a slip between cup and lip' and reiterated that any deal must avoid a customs border on the island of Ireland. The two leaders agreed that technical talks would continue in Brussels.
