Sterling shines as no-deal Brexit averted after tumultuous 2020

Boris Johnson gave the thumbs-up after signing off on the post-Brexit trade deal, which brought an end to years of painful negotiations. ©POOL/AFP Leon Neal

London (AFP) – The British pound zoomed Thursday to a 2.5-year dollar peak before Britain’s long-awaited exit from the European single market, with a trade deal in the bag on the final trading day of a coronavirus-ravaged 2020.

Sterling jumped to $1.3686 in early morning deals to attain the highest level since April 2018, boosted also after Britain became the first nation to approve AstraZeneca’s cheap Covid-19 vaccine.

Britain’s departure from the European Union takes full effect at 11:00 pm (2300 GMT), just hours after much of the country was moved into the top tier-four coronavirus restrictions.

The nation left the bloc on January 31 but has been in a standstill transition while it sought a free-trade agreement — which was finally clinched on Christmas Eve and was approved by lawmakers on Wednesday.

That dispelled long-running fears of a chaotic no-deal departure that could have sparked a double-dip downturn, after Britain tanked into a recession earlier this year on coronavirus fallout.

– ‘Massive sense of relief’ –

“A Brexit deal may have come extremely late in the day but there will be a massive sense of relief that the UK won’t be battling no-deal on top of everything else in the coming months — and that relief can be seen in the pound,” OANDA analyst Craig Erlam told AFP.

“It’s ending the year on a high… It’s all about the recovery now for the UK as it faces another devastating (virus) surge and most of the country moves into tier four.

“The UK has suffered more than most this year and the next couple of months is unlikely to be any better. It’s a long road to recovery and the Brexit deal will certainly help.”

Investors were embracing this week’s positive news on vaccines, which stoked hopes of a return to normality.

“Investors are continuing to ignore short term risks and are looking ahead to more normal times ahead with vaccines,” said ThinkMarkets analyst Fawad Razaqzada.

London’s benchmark FTSE 100 index finished 1.5 percent lower in holiday-shortened trading as the strong pound weighed on multinationals earning in dollars.

In the eurozone meanwhile, the Paris CAC 40 stocks index closed down 0.9 percent. 

Frankfurt’s DAX 30 shut for the year on Wednesday with a daily drop of 0.3 percent.

Bitcoin stood within sight of $30,000 after hit another record high overnight on wave of enthusiasm for the world’s most popular cyber currency.

– Long dark shadow –

Brexit and coronavirus have nevertheless cast a long dark shadow over global economies and stock markets this year, particularly in London which faced an annual loss of 14 percent.

That was the worst slump since the notorious global financial crisis in 2008.

Paris suffered a 7.1-percent drop but Frankfurt gained 3.6 percent in volatile record-breaking deals over the course of 2020.

“A turbulent and strange stock market year has come to an end,” said Comdirect analyst Andreas Lipkow.

Equities were slammed in the spring during the first wave of the pandemic.

They have since rebounded somewhat, especially after the European Central Bank committed to an emergency pandemic asset-purchase programme, increased to 1.85 trillion euros ($2.3 trillion) in December amid unprecedented global stimulus. 

While the world economy has been devastated by the coronavirus and lockdowns it has caused, markets were broadly boosted by governments and central banks stumping up mind-boggling amounts of money to prevent a depression.

The election of Joe Biden as US president in November — lifting hopes for a more calm leadership next year — has also bolstered sentiment. 

Wall Street stocks opened essentially flat on Thursday, with the Dow slipping less than a tenth of a percentage point while the S&P 500 and Nasdaq Composite both edged higher.

– Key figures around 1430 GMT –

Pound/dollar: UP at $1.3652 from $1.3625 at 2200 GMT

Euro/pound: DOWN at 89.93 pence from 90.26 pence

London – FTSE 100: DOWN 1.5 percent at 6,460.52 points (close)

Paris – CAC 40: DOWN 0.9 percent at 5,551.41 (close)

Frankfurt – DAX 30: DOWN 0.3 percent at 13,718.78 (close)

New York – Dow: DOWN less than 0.1 percent at 30,394.82

Hong Kong – Hang Seng: UP 0.3 percent at 27,231.13 (close)

Shanghai – Composite: UP 1.7 percent at 3,473.07 (close)

Tokyo – Nikkei 225: Closed for a holiday

Euro/dollar: DOWN at $1.2278 from $1.2298

Dollar/yen: DOWN at 103.06 yen from 103.19 yen

West Texas Intermediate: DOWN 0.7 percent at $48.05 per barrel

Brent North Sea crude: DOWN 0.7 percent at $51.25

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