The British pound continues to rise today against its US counterpart after rumors surfaced yesterday that the UK has reached a settlement to leave the European union.
The deal will see Britain pay between 45-55 billion pounds as it leaves the bloc, with the exact figure depending on how it is calculated.
This is one major hurdle out of the way for the British government as it tries to cut ties with the EU and leaves the BOE free to tighten monetary policy which should further benefit the sterling,
“The seemingly increased likelihood a Brexit transition deal makes it easier for the Bank of England to deliver on its signal that it intends to follow its first hike in a decade with further gradual tightening over the next few years,” noted Séamus Mac Góráin, a fixed income portfolio manager at JPMorgan Asset Management.
There are still 2 major unsolved issues at the moment about Brexit and if they are not solved in the coming weeks the pounds rise may quickly reverse.
The first is the free movement of citizens between the 2 countries which the EU has said is not negotiable but at this time the UK government is reluctant to agree to such terms.
The 2nd point is the border between Northern Ireland and Ireland which is a member of the EU. Installing a hard border would create chaos in the Area as well as significant problems for the UK economy.