Sterling recovers as hopes for a Brexit deal are revived

LONDON – The pound rose on Tuesday as markets grew more optimistic a Brexit deal would be reached, even as implied volatility gauges pointed to further price swings ahead of the Dec. 31 deadline.

Sterling dropped as low as $1.3135 (R19.67) last Friday when British Prime Minister Boris Johnson said a no-deal was “very, very likely”.

But it rebounded as high as $1.3444 on Monday amid relief that negotiators agreed on Sunday to “go the extra mile” to try to reach a deal and the European Union’s chief Brexit negotiator said a deal was still possible.

The pound continued this trajectory on Tuesday, up 0.3 percent at$1.3369 at 1211 GMT, as traders waited for further updates on negotiations. Versus the euro, it was up around 0.3 percent at 90.92pence.

Commerzbank’s head of FX and commodity research, Ulrich Leuchtmann, said the pound was in “wait-and-see” mode.