FXpert

Sterling rose against a weaker dollar on Friday, briefly testing the key $.130 level, and was set for a weekly gain as markets turned more optimistic about Brexit negotiations ahead of a key European Union leaders summit next week.

Sterling stabilised on Thursday as prospects for a Brexit deal appeared to improve, with Britain giving it a 66% chance of success.

The U.S. dollar was little changed against a basket of currencies on Thursday as investors waited for fresh news on whether new U.S. fiscal stimulus is likely in the near term.

Concerns that the latest Brexit talks were proving less promising than hoped and fears of new COVID-19 restrictions erased some of sterling's early gains on Wednesday.

The dollar dipped on Wednesday as risk appetite improved on hopes of at least some new fiscal stimulus before the November 3 U.S. Presidential election, and as investors priced for the prospect of a Democrat victory next month.

Currency traders are seeing increased demand for derivatives that enable holders to position for a stronger pound, as improved chances of a Brexit trade deal start to push the risk of negative interest rates off the table.

Sterling held near $1.30 on Tuesday as signs of progress in Brexit talks helped cement gains after investors pushed back expectations for when the Bank of England would cut interest rates below zero.

The safe haven dollar and Japanese yen rallied on Tuesday after U.S. President Donald Trump called off negotiations with Democratic lawmakers on a coronavirus relief stimulus package until after the Nov. 3 election.

The safe-haven U.S. dollar dipped on Monday and riskier currencies outperformed on optimism that U.S. lawmakers will agree on new stimulus to blunt the economic impact of the coronavirus, while investors awaited updates on the severity of President Donald Trump's COVID-19 symptoms.