The British pound climbed against rivals on Monday, spurred by a report that Prime Minister Theresa May has secured customs deal with the European Union.
The pound GBPUSD, +0.3085% rose to $1.3070 from $1.2966 late Friday. Fresh gains for the currency came after The Sunday Times said May has a “secret” deal that will avoid a feared hard border with Northern Ireland, and which will also keep a parliamentary revolt at bay. She is also in the process of working out an agreement for a free-trade deal with the European Union, according to the report.
“Any shift in the participants’ attitudes toward greater compromise that would lead to a “softer” Brexit would certainly be positive for the pound,” said Marshall Gittler, chief strategist at ACLS Global.
The buck, measured by the ICE U.S. Dollar Index DXY, +0.16% was mostly flat at 96.503, with losses largely linked to the pound. The gauge gained modestly last week, with a better-than-anticipated October jobs report on Friday largely priced in.
The euro EURUSD, -0.0351% traded at $1.1383, unchanged from where it left off Friday.
For the dollar, most of the focus this week will center on U.S. midterm elections, with the Democrats expected to win back control of the House of Representatives, while the Republicans will keep control of the Senate. But overshadowing these predictions is the fact that many polls got 2016 presidential elections-calls all wrong.
The results should start coming in on Nov. 6—Election Night in the U.S.—and economists say it will quickly become clear whether those forecasts are correct. But some say the wait for a conclusive result could stretch into 2 or 3 a.m. Eastern Time on Wednesday.
“A divided Congress will make it more difficult for the U.S. President to pass the legislation he wants and this would be a bearish catalyst for the U.S. currency, especially toward the end of the year,” said Konstantinos Anthis, head of research at ADSS, in a note to clients. “Nevertheless, until we get a clear picture of what the outcome of the elections will be, the greenback should continue on the same positive tone.”
A Federal Reserve meeting will also grab attention this week, thought economists expect the central bank will hold interest rates steady at the end of its two-day meeting on Thursday. More focus is likely to fall on the text of the accompanying Fed statement.
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