The euro and sterling rose on Wednesday, underpinned by optimism for a Brexit deal, while the dollar lost ground against a basket of currencies even as U.S. bond yields hovered at multiyear peaks.
The common currency’s gains were limited by worries about the sustainability of Italy’s public finances, though Italian Economy Minister Giovanni Tria reiterated on Wednesday that the government would do everything in its power to regain the confidence of financial markets.
“There is more optimism that they will find some agreement between Britain and (the) European Union before Brexit,” said Steve Englander, global head of G10 FX research at Standard Chartered Bank in New York.
This week, Brexit negotiators have hinted at progress toward terms for Britain to leave the economic bloc in March, which gave investors hope for an orderly departure. Still, caution persists due to scant details.
On Wednesday, EU’s Brexit negotiator, Michel Barnier, said the two parties have agreed on much of the withdrawal agreement ahead of a summit of all the bloc’s 28 national leaders next week.
The pound reached a two-week high at $1.3216 Wednesday and held a gain of 0.4 percent on the day. It hit its strongest level against the euro since June 15 at 87.23 pence. The euro rose 0.3 percent to $1.15270 and held steady at 129.750 yen. Some traders remain skeptical about a final Brexit deal.