European session review: GBP rises on hopes for post-Brexit trade deal

GBP firmed against its major rivals in the European session on Thursday, supported by hopes for a post-Brexit trade deal.

The EU's chief Brexit negotiator Michel  Barnier tweeted earlier today that the trade talks with the UK are showing “good progress” but cautioned “last stumbling blocks remain”.  In addition, the EU official familiar with the situation told Reuters that the two sides could possibly reach a trade deal by the end of the week, but added that he wouldn't bank on it. 

Meanwhile, the latest monetary policy decision of the Bank of England’s (BoE) Monetary Policy Committee (MPC) had little impact on the pound. As widely expected, the BoE's policymakers decided to hold the bank's key rate at a record low of 0.10 percent and the government bond purchases at GBP 825 billion. The latest decision indicated that the BoE's MPC members took a wait-and-see approach, awaiting the outcome of the UK-EU trade negotiations. "The outlook for the economy remains unusually uncertain. It depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom", the bank said in its policy statement. However, the Bank also noted that Covid-19 vaccine rollout is likely to reduce the downside risks to the economic outlook. "The successful rollout of vaccines should support the gradual removal of restrictions and rebound in activity that was assumed in the November Report."