London Markets: Pound surges on report of possible draft Brexit deal

This post was originally published on this site

The British pound jumped Tuesday, shaking off losses seen at the start of the week, on a report of a possible draft Brexit agreement.

A report from Bloomberg suggested the two sides were closing in on a preliminary deal. That report extended gains after relatively optimistic comments made by Michel Barnier, the top EU negotiator.

The pound GBPUSD, +1.0471% shot up to as high as $1.2796, after a level of $1.2606 seen late in New York on Monday. The currency lost ground Monday on fresh concerns the U.K. and EU won’t reach a deal by the Oct. 31 deadline after a weekend of talks didn’t yield a breakthrough.

Sterling saw its best two-day run in over a decade late last week. On Friday, it reached as high as $1.2706, its strongest since Theresa May was prime minister before Boris Johnson took over in July. Last Thursday, the pound saw its best single-day percentage gain since March.

A strong pound weighed on the FTSE 100 UKX, -0.03%  , which was trading almost flat despite gains for indexes across the U.S. and Europe. Given a chunk of U.K. companies derive revenue from outside the country, a stronger pound can hurt their bottom line.

Lloyds Banking Group LLOY, +5.24%  and the Royal Bank of Scotland RBS, +5.07%  each rallied over 5%, while multinationals including GlaxoSmithKline GSK, -1.70%   and Unilever ULVR, -1.65%  lost ground.