Time for a recap The pound has hit its highest level in 31 months, on hopes that an EU-UK trade deal could be close. Sterling jumped to $1.355 for the first time since May 2018, after Commission president Ursula von der Leyen told the European Parliament that ‘there was a path to an agreement’. Stocks also rallied in London, and across Europe, on hopes of a Brexit deal, a US stimulus package and vaccine rollouts to end the pandemic. However, sterling has now fallen back to $1.347 in late trading after Downing Street said MPs would rise for the Christmas recess as planned tomorrow (although they could be swiftly recalled to vote on a deal if one is reached). Asked if he still thinks No-Deal is most likely, Prime minister Boris Johnson said that a ‘good deal’ was there to be done, but that the EU knew the UK’s limits. Cryptocurrency Bitcoin has raced to a record high, smashing $20,000 for the first time ever. It surged by more than 6%, extending a winning streak this year amid growing interest among big investment companies attracted to its potential for quick gains, and fearing they might miss the boat.... Here are several reasons for its rally. UK factories have reported that disruption at the ports is hurting their supply chains, leading to delays, higher prices, and shortages. Inflation across the UK has fallen to just 0.3%, dragged down by cheaper clothes as retailers slashed prices during the Black Friday sales. Economists said weak economic demand, and the November lockdown, had also kept a lid on prices, although a disruptive Brexit could push them higher. European companies performed better than expect this month, according to the latest eurozone PMI report which showed a much shallower downturn than expected. Here are today’s other stories: The latest word from parliament tonight is that the House of Commons will go into recess for the Christmas break tomorrow, as planned. However, Downing Street says the House can be recalled very quickly to pass the trade deal legislation if necessary, our Politics Liveblog explains. Downing Street has also put out a statement saying it expects the trade talks with the EU to continue “over the coming days”. The pound has now dropped back to $1.347, only a little higher today. That suggests some disappointment in the markets, as MPs’ Christmas break could have been delayed if a deal was extremely close. But with talks continuing, MPs can be brought back at short notice if there is a deal, as the BBC’s Laura Kuenssberg and the Daily Mirror’s Pippa Crerar both explain: Brexit trade deal optimism has also helped the London stock market to close higher. The blue-chip FTSE 100 has closed 57 points higher at 6570 points, a gain of 0.9%. That’s close to last week’s nine-month high. The smaller FTSE 250 index, which has a greater concentration of UK companies, jumped by 1.2%, close to its highest level since February. It was partly lifted by Dixons Carphone which jumped 12% after reporting strong results today, thanks to online orders. Back on Brexit... and Boris Johnson said that ‘a good deal’ can be done, but the EU knows the UK’s limits in the negotiations. Asked during a news conference (to discuss the Christmas rules) whether he still thinks moving to WTO terms is the most likely outcome, Johnson said: “Where we get to with the EU - well, again, that is very much a matter for our friends. They know what the parameters are. “We’ve just got to make sure that we control our own laws and control our own waters, and there’s a good deal there to be done but if not, WTO/Australia terms it is, and as I say we will prosper mightily on those terms as well. Ryan Browne of CNBC has written a handy thread about the factors pushing bitcoin up: Ruffer told its shareholders yesterday afternoon that it had bought its bitcoin stake, as a ‘small but potent’ insurance against currency devaluation. In a performance update memo published here, it wrote: The exposure to bitcoin is currently equivalent to around 2.5% of the portfolio. We see this as a small but potent insurance policy against the continuing devaluation of the world’s major currencies. Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see. The surge in bitcoin’s price comes as British fund manager Ruffer Investment Management confirmed it has invested around 2.7% of its portfolio in the cryptocurrency. Ruffer, which manages around £20bn, has told Reuters that it allocated some of its funds into bitcoin last month, as a ‘hedge’ against the risks in ‘distorted’. Here’s a flavour: British fund manager Ruffer Investment Management last month made a bet on bitcoin now worth around £550m ($745m), a spokesman for the company told Reuters, in one of the largest signals of rising institutional interest in the digital currency this year. The allocation by Ruffer, which managed £20.3bn ($27.3bn) in assets at end-November on behalf of more than 6,500 investors globally, “acts as a hedge to some of the risks that we see in a fragile monetary system and distorted financial markets,” the spokesman said via email. Ruffer’s move is being seen as confirmation that institutions are taking bitcoin seriously as an asset class -- one of the factors behind this year’s rally. Yoni Assia, CEO and co-founder of trading platform eToro, says financial institutions have “woken up” to cryptocurrencies this year, with many banks and hedge funds buying bitcoin during 2020. We expect this to continue into 2021 as fears of inflation continue to creep up globally. Back in October, JP Morgan analysts suggested that bitcoin could challenge gold as an alternative currency, especially among younger investors, suggesting that it could double or triple (it was $13k at the time). Three years earlier, CEO Jamie Dimon was more sceptical, saying bitcoin was a “fraud” (it was around $4,100 then). Bitcoin hits record high over $20,000 Sterling isn’t the only asset rallying today. Cryptocurrency bitcoin has smashed through the $20,000 mark for the first time ever. It’s currently up over $1,000, or 6%, today at around $20,600, in a sudden surge: Bitcoin has been rallying sharply since the spring (when it briefly fell below $5,000). Several institutional investors have backed cryptocurrencies this year, while Paypal is also embracing bitcoin. Nigel Green, founder and CEO of financial advisers deVere, explains “Unlike previous surges, this time around, a major price driver seems to be fuelled by the flow of institutional investors, who are steadily increasing their exposure to Bitcoin and other cryptocurrencies. “They’re being attracted by the good returns that the digital asset class is currently offering but, more importantly, by the huge future potential it offers. “As some of the world’s biggest institutions – amongst them multinational payment companies and Wall Street giants - pile ever more into crypto, bringing with them their enormous expertise and capital, this in turn, swells consumer interest.” Bitcoin’s supporters also argue that it protects against inflation, triggered by the huge asset-purchase programmes launched by central bankers such as the Federal Reserve. As Green puts it: “These emergency measures, like the massive money-printing agenda, reduce the value of traditional currencies like the dollar and raise the inflation threat. Bitcoin, like gold, acts as a shield.” Today’s surge comes almost exactly three years since bitcoin hit $19,000 for the first time ever, before then falling sharply through 2018. The pound has now dipped back slightly from its 31-month high of $1.355, after Downing Street told reporters that No-Deal remains the most likely outcome, although “some progress” has been made. Reuters has the details: Britain and the European Union have made “some progress” in post-Brexit trade talks but there are still significant gaps and the most likely outcome is for negotiations to end in no deal, Prime Minister Boris Johnson’s spokesman said on Wednesday. “We have made some progress in some areas but it still remains that there significant gaps,” the spokesman told reporters. “Our position is still that we want to reach an FTA (free trade agreement) but it is still the case ... the most likely outcome is still leaving on Australia terms.” Australia does not have a free trade agreement with the EU, meaning the bulk of its trade is on World Trade Organization terms. But the pound’s still clinging on above $1.35, and up around three cents since Johnson and Von der Leyen agreed to keep negotiating on Sunday. Here’s our news story on the problems caused by the disruption at UK ports. Fawad Razaqzada, market analyst at Think Markets, suggests a UK-EU free trade deal could push the pound up to $1.40. No-deal, though, could send it sliding down to $1.20. He says: Ursula von der Leyen this morning said that now there is a “narrow” path has opened up for the two sides to strike a deal. Although the EU Commission President stopped shy of saying whether there will be a deal or not as the issue of fishing rights are “still very difficult”, she added that there was progress on most outstanding issues At over $1.35 against the dollar, the pound is trading near levels where a Brexit deal is being ‘priced in’ by investors. That meant it’s all the more vulnerable if negotiations falter, as Paul Dales of Capital Economics explains: The recent swings in sterling triggered by shifts in sentiment towards the chances of a Brexit deal have left little room for the pound to appreciate if there’s a deal, but plenty of room for it to depreciate if there’s a no deal As the markets appear to have largely priced in a Brexit deal, such a result by 31st December 2020 would be unlikely to push the pound much above the current levels of $1.35 and €1.13. But as a no deal would come as something of a shock to the markets, there is more scope for it to fall sharply. Sterling hits highest since 2018 The pound has hit its highest level since May 2018, as optimism over a Brexit deal builds. Sterling has climbed nearly a cent to trade at $1.355, a 31-month high, after European Commission president Ursula von der Leyen told MEPs this morning that “there is a path to an agreement now”, saying: “As things stand, I cannot tell you whether there will be a deal or not. But I can tell you that there is a path to an agreement now. The path may be very narrow but it is there. This has pushed the pound above the highs seen earlier this month. Investor seem more optimistic about a deal being achieved, even though von der Leyen also warned that fishing rights are still an obstacle. Neil Wilson of Markets.com explains that traders seem to be pricing in a deal.... Sterling jumped on hopes the UK and EU are close to a deal, with Ursula von der Leyen giving a broadly upbeat assessment of talks. The spot market is inclined to think a deal is coming, while options markets also show traders are scaling back bets on a no-deal collapse. Time is desperately short, though, and MPs may have to delay their break to get any legislation though, as the Financial Times points out: Some Conservative Eurosceptic MPs have indicated they could tolerate the deal taking shape. Jacob Rees-Mogg, leader of the House of Commons, is clearing the decks to legislate on the details of a deal at breakneck speed. Mr Rees-Mogg has not moved a “recess motion”, suggesting that plans for parliament to rise for its Christmas break on Thursday have been scrapped. “It’s highly likely we’ll be sitting next week,” said one senior government official.