The pound rose today and could score its biggest monthly rise in more than a decade as the combination of a weak dollar and the falling risks of Britain leaving the European Union without a deal has fueled demand.
The immediate catalyst for the pound’s gains was a cautious US Federal Reserve who kept the door open for further policy easing after cutting interest rates for the third time this year.
But the broader base for the pound’s rally this month was some progress on the Brexit deadlock.
British Prime Minister Boris Johnson, who has failed to deliver on his “do or die” promise that Britain would leave the EU on October 31, secured agreement for an election on December 12 after the EU granted a third delay to Brexit.
The Conservative Party holds around an 8-point lead over the opposition Labour Party, according to a Survation poll conducted by the Daily Mail.
In its latest updated forecasts, Morgan Stanley and Goldman Sachs put the risk of a no-deal Brexit at a low 5% and assign a 75% probability of a deal followed by the likelihood of 20% for Britain opting to stay within the European Union.
Against the dollar, the pound rose 0.3% at $1.2941 and closing in a five-month high above $1.30 hit last week. Sterling has gained 0.2% against the euro.
The pound has strengthened more than 5% against the dollar so far this month, its biggest monthly rise since May 2009, according to Refinitiv data.
The Fed lowered its policy rate to 1.5%-1.75%, but dropped a previous reference in its statement to “act as appropriate” to sustain the economic expansion.
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