- Sterling climbs after reports that UK and EU have settled on the cost of the so-called Brexit “divorce bill.”
- Estimates suggest that it will be around €50 billion.
- The pound reacts well to the news, climbing above 1.34 against the dollar to a two-month high.
LONDON — The value of the pound is climbing on Wednesday as traders and investors react to reports overnight that the UK and EU have finally reached an agreement on the amount Britain will pay in a so-called “divorce bill” when it leaves the bloc.
Both the Daily Telegraph and the Financial Times reported on Tuesday evening that bill had been agreed, although their estimates of how much that bill would be differed.
Citing unnamed diplomats, The FT reported that Britain has agreed to liabilities of up to €100 billion, while it expects to ultimately pay “less than half that amount.”
The Telegraph, meanwhile, reported that the UK will reportedly pay between €45-55 billion as it leaves the European Union, with the exact figure depending on how it is calculated.
The divorce bill has been a major sticking point in negotiations, with EU negotiators refusing to progress talks onto subjects like the transition deal until “sufficient progress” was reached on it and other issues like EU citizens’ rights and the Irish border.
Initial reports of the agreement sent the pound substantially higher on Tuesday evening, and it has continued to rise on Wednesday morning in European trading, climbing above 1.34 against the dollar to hit a two-month high.
The logic behind the move seems to be that the agreement of a settlement represents substantial progress in talks, and removes a little bit of the uncertainty that has been plaguing market participants in recent weeks and months.
By just after 9.15 a.m. GMT (4.15 a.m. ET) the pound is around 0.3% higher on the greenback, having pulled back from a gain of around 0.6% a little earlier during trade. Here is the chart:
“Following last night’s jump, the cable continued its rise today on hopes of a significant Brexit breakthrough. Shorts are coming out as the squeeze comes on but will the rally last? It’s down to the politics again, with various risks to the bullish case still unresolved. Nevertheless it may be time to turn cautiously optimistic on sterling,” Neil Wilson, senior analyst at ETX Capital said in an email earlier on Wednesday morning.