Pound rises on Brexit deal hopes, dollar wobbly ahead of Fed meeting

The pound gained against the dollar and euro on hopes that the European Union and Britain will agree on a free trade deal after their decision to extend negotiations. 

The dollar sat near a 2 ½-year low against its peers ahead of a U.S. Federal Reserve meeting ending on Wednesday. It stood at 103.995 on the yen. 

Analysts warn that the pound’s rally may not last due to Britain and the EU failing to compromise on their differences and risk a no-deal agreement.

The British pound rose 0.7% to $1.3317, its biggest one-day jump since Dec. 1. It climbed to 91.07 pence per euro, its strongest since Dec. 9, while the euro gained 0.2% to 1.2129 against the dollar.

Britain and the EU  have agreed to work on a trade deal despite missing their latest deadline to avoid a turbulent exit for Britain at the end of the month. If the two parties failed to arrive at an agreement, nearly $1 trillion in annual trade from tariffs and quotas from both sides is at stake.

The dollar is also facing a big week ahead of the Fed’s policy meeting. The dollar index sat at 90.793, near a 2 ½-year low.

The Chinese yuan stood at 6.5370 in onshore trade and at 6.5237 offshore. The Aussie steadied at 75.342 U.S. cents, while the kiwi rose against the dollar.