FX round-up: Jump in Sterling knocks US dollar off its perch, EM currencies find reprieve

Sterling snapped higher on Wednesday, as traders reacted to headlines that the European Union's chief Brexit negotiator had held out the possibility of a bespoke agreement with the United Kingdom - albeit with conditions.

The details of the proposal were as yet unknown, but after two days of what some observers said was posturing by officials from both sides and in the wake of negative headlines earlier in the session, the reaction was quick and sharp.

Michel Barnier was reported to have said that he was prepared to give the UK a deal unlike with any other country.

Barnier was quoted by Reuters as saying: "We are prepared to offer a partnership with Britain such as has never been with any other third country."

Nevertheless, he reportedly added: "We respect Britain’s red lines scrupulously. In return, they must respect what we are," he told reporters in Berlin after a meeting with German Foreign Minister Heiko Mass. "Single market means single market...There is no single market a la carte."

As of 1611 BST, cable was higher by 0.88% to 1.29864, alongside an advance of 0.91% versus the single currency to 1.1110.

Against that background, the Canadian dollar was little changed against the Greenback, edging higher by just 0.13% to 1.29498 as markets waited on the results of the trade talks that were ongoing in Washington DC.

Nevertheless, Barnier's remarks appeared to knock even the US dollar spot index off its intraday highs, even against the likes of the Argentina and Mexican peso - which remained very much on traders' minds - and the Brazilian real.

To take note of, the latter of those Emerging Market currencies was changing hands just below its record lows versus the US dollar.

Turkey's lira was lower as well, trading at 6.4353 versus the dollar even after rate-setters moved to tighten liquidity in overnight funding markets.

Euro/dollar was little-changed, albeit in the 'green' and off earlier lows at 1.16976, in the wake of a report in the Italian press that said officials in Rome might be banking on the European Central Bank to purchase more of the country's bonds.

The yen on the other hand was clearly weaker, with the US dollar gaining 0.46% to 111.688.

So too was the Aussie, which was down by 0.58% to 0.72958.