Sterling has jumped to its highest levels since the summer amid rising optimism about a potential breakthrough in Brexit negotiations.
The pound was trading up more than three per cent at $1.277 this afternoon, while it rose against the euro to buy €1.157.
The rally reverses losses suffered during the recent summer slump, and represents the highest rates in five months.
It came amid rising hopes that Prime Minister Boris Johnson will be able to secure a Brexit deal ahead of key talks later this week.
EU chief negotiator Michel Barnier today indicated that there was still the possibility of a deal being reached. However, he said the two sides needed to reach an agreement on a legal text by the end of today.
“Talks are difficult but I believe an agreement is still possible,” he wrote in a tweet.
The comments have boosted confidence that Johnson could have the chance to seek approval for an exit by the end of the week.
The Prime Minister is currently compelled by law to seek an extension to the current Halloween deadline if he has not secured an exit agreement by the end of Saturday.
“For the pound, the playbook is simple,” said Michael Brown, senior market analyst at Caxton.
“Reports of a deal, and orderly Brexit, edging closer would result in upside, continuing last week’s trend. Conversely, reports that dampen expectations of a new UK-EU agreement will see sterling come under renewed pressure.”
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