London (AFP)

The Brexit deal between London and Brussels has sent the pound to new highs in five months on Thursday after a week of crazy volatility, the currency jumped or fell with each headline on the negotiations.

In the wake of the announcement of the compromise, the pound sterling jumped by about 1% against the dollar until 1.2990 dollar, a little less against the European currency to 85.76 pence for one euro, levels most seen since May.

This momentum fell like a puff when two British parties meant that they did not support the text as it stood, raising fears of its rejection in Parliament ... and a return to square one.

These nasty twists testify to a roller-coaster week for the British currency, which has returned to levels of volatility against the dollar seen over the past year.

"The book is going up and down, markets are struggling to find a point of balance in the midst of chaos," says Sebastien Clements, analyst at OFX.

It all started last Thursday when Boris Johnson and his Irish counterpart gave a glimpse of a "path" to compromise on the key issue of the Irish border. A surprising statement while an agreement was considered "extremely improbable" at the beginning of the week.

Despite the lack of detail and after a cautious first reaction, the markets have been racing and the pound has gained nearly 2% against the dollar and the euro: very important movements for the colossal currency market.

On Friday, the British currency continued its momentum, accumulating in two days nearly 4% gains against the dollar and 3% against the euro.

After a bout of weakness Monday, due to less positive corridors in Brussels on the outcome of negotiations, the pound resumed its forced march.

Tuesday, Wednesday and Thursday, it reached new highs since May against the euro and the dollar, boosted by optimism about an agreement ... Before dropping Thursday when fears of a failure of the agreement and the spectrum of an EU exit without agreement has resurfaced.

In total, in a week, the currency has taken about 4.7% against the dollar and 3.4% against the euro, but still remains well below its levels before the June 2016 referendum.

Normally, the currency reacts to changes in monetary policy or to numerous economic indicators. But for several months, the Brexit has become the main factor in the evolution of the pound, making it a good indicator of the opinion of investors about the modalities of the exit of the EU.

The business community scrutinized every step of the negotiations as a negotiated exit from the EU would be much softer for the UK economy than a divorce without an agreement that would be accompanied by a brutal reintroduction of tariff barriers.

The evolution of the pound has also been the "home" of the British market for months, the price of the pound influencing the results of exporting multinationals and small businesses that see the cost of their imported supplies fluctuate with the currency.

- The ball at Westminster -

According to David Madden, analyst for CMC, the impressive rise of the pound in recent days shows how the fears of a "no deal" had been incorporated into the courses.

Between early May and mid-August, the pound had lost nearly 9% against the euro and the dollar.

The eyes will now turn to Westminster where MPs will vote on the text Saturday.

The leader of the Labor Party, the main opposition party in the United Kingdom, has called on British MPs to "reject" the agreement between London and the European Union, making it very doubtful that it will be adopted by Parliament, especially since Northern Ireland party DUP is also opposed.

"There is always a good chance we are heading for a postponement and an election" in the UK, said Craig Erlam, an analyst for Oanda.

Investors wishing to take advantage of the high volatility of the pound probably have a bright future ahead of them.

© 2019 AFP