One Giant Leap for Europe

After nearly four days of often acrimonious talks, the 27 EU leaders settled on a stimulus package worth €750bln in the early hours of this morning. The agreement on the recovery fund was announced by council president Charles Michel simply tweeting “Deal!”. The accord is expected to generally strengthen the euro, however, sterling is currently holding well, at over 1.1050 as traders take profits on their euro positions.

Sterling has generally enjoyed a good start to the week, whilst the dollar retreated as US Treasury bond yields fell due to concerns of the continuing rise in Coronavirus infections, closing at $1.2650.

The pound was also helped as the market’s fear of negative rates in the UK abated. Trader’s worries eased as members of the BoE’s Monetary Policy Committee rowed back on the likelihood of them during a presentation to the Treasury select committee.

Brexit talks resume today, after the UK’s chief negotiator, David Frost, hosted his counterpart Michel Barnier for hopefully an enjoyable dinner last night. Any signs that the talks are progressing well will help sterling.

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