Sterling slumps just hours after soaring to five-month high as investors fear DUP will torpedo Brexit deal
- Sterling rose above $1.29 this morning to marks five-month high against dollar
- But it later fell amid fears over no guarantee of Parliament backing agreement
- Volatility comes after it gained more than 6% in value against dollar this week
The pound had a tumultuous day against the dollar today after Prime Minister Boris Johnson revealed a Brexit deal had been agreed with the European Union .
Sterling rose by 1 per cent this morning towards $1.30 which marked a five-month high for the currency as Mr Johnson headed for a crunch EU summit in Brussels.
But the currency then plunged this afternoon when it soon dawned on investors that there was no guarantee of the UK Parliament backing the agreement.
This graph showing the pound against the dollar over the past 24 hours shows how it rose sharply this morning to nearly $1.30, before falling back to $1.286 by the afternoon
The volatility comes after the pound gained more than 6 per cent in value against the dollar this week as hopes increased of a Brexit deal by the end of October 31.
Independent economist Julian Jessop told AFP: 'After the initial relief that the UK government and EU have done a deal, markets are worried that it still does not have enough support to get through parliament on Saturday.'
While the pound soared to within a whisker of $1.30 earlier today, by this afternoon it was roughly back to where it started from against the dollar.
Sterling jumped to a five-month high against the greenback, at $1.299, before losing ground to stand 0.4 per cent lower at $1.276. By 3.30pm it was at $1.286.
Sebastien Clements, currency analyst at OFX, said: 'As has been the case with the UK for the past 18 months, nothing good lasts forever.
'In this case, nothing good lasts for 24 hours. The Brexit agreement dream has been shattered by the DUP, after reports have surfaced claiming they are still unwilling to back Johnson and his EU divorce agreement.
'As we know, the markets are extremely fickle at the best of times, and a great surge is typically accompanied by a minor retrace. However, this was more than a minor retrace as GBP/USD has moved from $1.27 at UK market open to $1.29 at midday.
This six-month graph shows how the pound has risen over the past week to a five-month high
'For now, the pound has stabilised around $1.28 and it seems as though the extreme volatility from earlier has subdued. However, all it takes is a leak from Westminster to restart the market chaos.'
The British Chambers of Commerce warned there was 'still a long way to go' before business could feel confident of a deal being struck.
Prime Minister Boris Johnson leaves the back of Downing St today on his way to Brussels
The comments come as businesses have been forced to shelve investment plans amid the Brexit uncertainty, which has taken its toll on the UK economy.
The falls came after the Democratic Unionist Party said it would not support the deal in its current form.
Analysts have revised up expectations of Brexit happening at the end of this month while traders have cut back their short positions on the British currency.
Artur Baluszynski, head of research at Henderson Rowe, said: 'Big win for Boris. If he manages to get it through Parliament, we should see a wave of 'risk-on' trades coming into UK market.
'However, let us wait and see all the details and then let the markets decide how likely it is for the UK parliament to accept it. For now, expect some positive momentum in sterling and domestically focused asset classes.'
Michael Brown, senior analyst at Caxton, added: 'Sterling has gained over 1 per cent this morning on news that the UK and EU have reached a deal on Brexit.
'However, some of the wind has been taken out of the pound's sails after reports that the DUP are not yet onboard to back a deal. Therefore, the Parliamentary arithmetic for passing a deal looks challenging.
'Attention will continue to focus on whether the new agreement will pass in the Commons on Saturday, while sterling traders will continue to pay close attention to developing headlines from this afternoon's EU summit.'
Anti-Brexit demonstrators continue to protest outside the Houses of Parliament this morning
The announcement by Mr Johnson followed days of intense negotiations, but he is expected to face a tough task getting the agreement through Parliament.
With the Commons expected to sit on Saturday to discuss it - the first weekend session for 37 years - the DUP insisted it still could not yet back the Government's Brexit plans.
The stance of the DUP is important because the party wields influence over some Tory Brexiteers.
In Mr Johnson's announcement today, he tweeted: 'We've got a great new deal that takes back control.
'Now Parliament should get Brexit done on Saturday so we can move on to other priorities like the cost of living, the NHS, violent crime and our environment.'
European Commission president Jean-Claude Juncker tweeted: 'Where there is a will, there is a deal - we have one!
'It's a fair and balanced agreement for the EU and the UK and it is testament to our commitment to find solutions. I recommend that EUCO endorses this deal.'