The UK pound edged up 0.6 percent against the US dollar following a report in The Times that the UK-EU negotiators have concluded a “tentative agreement on all aspects of a future partnership on services,” including the exchange of data. Sterling was trading at $1.2836 in Asia this morning, although the greenback remained near its 16-month high against a basket of its rivals due to favorable economic indicators from the US.
The UK-EU deal on financial services would secure access to the bloc for the British financial sector. The outlet, citing a government source, said that the agreement would be finalized within three weeks.
On October 31, Brexit Secretary Dominic Raab also told British lawmakers that the EU and the UK could reach a divorce deal by November 21. However, the official noted that the issue of the border between Northern Ireland and the Republic of Ireland was still a matter of concern.
In a June 2016 referendum, the United Kingdom voted to leave the European Union. Although Brexit is scheduled for late March 2019, London and Brussels still cannot agree on a number of key issues, including the Irish border and customs arrangements, making a no-deal scenario a possibility.
This scenario deeply worries the UK financial sector. In July, Catherine McGuinness, the chairperson of the policy and resources committee of the City of London, said that the UK financial sector could lose up to 12,000 jobs due to Brexit because many financial companies were relocating their businesses to the European Union. According to Bank of England estimates, the City may lose as many as 5,000 jobs by late March 2019, when the United Kingdom is set to withdraw from the European Union.