Sterling rallies after May announces cabinet backs deal

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The pound has rallied after the Prime Minister announced she had the backing of the cabinet for her Brexit withdrawal plan.

It followed a volatile day’s trading while the outcome of Teresa May’s five hour meeting with cabinet colleagues remained unclear.

The pound reached $1.30 following the announcement, having fallen to $1.28 in the mid afternoon.

Against the euro the pound recovered to €1.15 after dipping to €1.14.

Market commentator Russ Mould at AJ Bell said investors were “using the pound as their lightning rod” over worry and satisfaction about how the negotiations were progressing.

“For the last 18 months the Brexit talks haven’t really gone anywhere and people had begun to fear no deal,” he said.

The pound is still more than 10% below where it was before the referendum over leaving the EU 2016, but it has rallied from deeper lows “as markets have begun to express optimism that some kind of deal can be struck” he added.

‘Milestone’

Business bodies welcomed the agreement, with the CBI describing it as “an important step forward” towards a negotiated Brexit.

Carolyn Fairbairn, CBI directorgeneral, said: “It moves the UK one step away from the nightmare precipice of no deal.”

“Securing a transition period has long been firms’ top priority and every day that passes without one means lost investment and jobs, hitting the most vulnerable hardest.”

The British Chambers of Commerce (BCC) said agreement on the draft was a “milestone” but said business still needed clarity and precision on the specific terms of trade they will face.

Dr Adam Marshall, BCC director general, said businesses would need to look carefully a the “real-world” implications of the agreement.

He said the agreement could represent “the end of the beginning – but not yet the beginning of the end” of uncertainty.