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Pound recovers regardless of EU warning Brexit commerce deal ‘unlikely’

The pound slipped on Thursday, as the latest round of Brexit talks between the U.K. and EU ended without agreement.

Matt Cardy/Getty Images

The pound recovered on Thursday despite the U.K. and European Union both warning a Brexit trade deal was far off.

The pound
dipped 0.4% against the dollar to $1.2674, earlier in the day over resurfacing fears of a no-deal Brexit before recovering to trade 0.2% up at $1.2757, helped by a weakening U.S. dollar.

Prime Minister Boris Johnson had said he wanted British businesses to know by the end of July whether a deal was imminent, or if they should prepare for a no-deal scenario ahead of the end of the transition period on Dec. 31.

But both sides admitted on Thursday that an agreement was some way off, with the U.K.’s chief negotiator David Frost saying it is “unfortunately clear” a preliminary deal won’t be reached this month.

“Although we will continue energetically to seek an agreement with the EU, we must face the possibility that one will not be reached,” Frost said.

The EU’s top negotiator, Michel Barnier, said “no progress” has been made over key issues of state aid and fisheries but maintained that the talks were constructive. Barnier added the U.K.’s position made a trade agreement at this point “unlikely.”

The internationally-exposed FTSE 100
lost earlier gains as mixed U.S. jobs data shifted the mood for equities, closing 0.1% higher. The more domestically-focused FTSE 250
also edged 0.1% higher.

Equity markets had enjoyed earlier gains, despite rising tensions between the U.S. and China over the closure of a Chinese consulate in Houston. Strong earnings from electric-car maker Tesla
and consumer goods giant Unilever
as well as encouraging signs of a recovery from German automobile maker Daimler
helped maintain the positive momentum from Wednesday’s late rally on Wall Street.

Johnson visited Scotland on Thursday and said the pandemic response has shown the “sheer might” of the union. The Scottish National Party said Johnson’s visit highlighted he was “in a panic” over gathering support for an independent Scotland.

Stocks in focus

Unilever surged 8.6%, after it reported a rise in profit in the first half of the year. The Ben & Jerry’s ice cream and Dove soap maker made a net profit of €3.28 billion, up from €3.01 billion the previous year, despite the challenges posed by the coronavirus pandemic. The company also announced plans to demerge its tea business, which includes Lipton and PG Tips brands, following a strategic review.

Advertising giant WPP
rose 2.6%, after its French rival Publicis beat expectations in the second quarter, suggesting that the advertising demand slump may not be as bad as feared.

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