Sterling shoots higher as Barnier suggests unique Brexit deal

Sterling shot higher on Wednesday afternoon after the EU's chief Brexit negotiator 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."

However, Barnier also insisted that the EU would not allow a deal that weakened the body's single market.

"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."

Spreadex analyst Connor Campbell said this kind of bullishness has been in short supply of late, hence its "hugely rejuvenating" impact on sterling.

Meanwhile, Oanda's Craig Erlam said: "While this doesn’t mean the EU’s red lines have changed - in fact he explicitly confirmed that they must be respected, along with the UK’s - it does suggest that more constructive conversations can happen to find a workable solution that suits both sides, should one exist. That’s a big change from the focus on punishing the UK for voting to leave which appears to have been the case for the last two years."

At 1540 BST, the pound was up 0.9% against the dollar at 1.2985, having earlier hit 1.299 for the first time in more than three weeks, and 0.8% firmer versus the euro at 1.1101, moving away from the week’s one-year nadir.

Erlam noted that traders have become very concerned about negotiations in recent months, particularly the increased talk of no-deal Brexit. "These comments will at least start to alleviate those concerns," he said. "There’s still a long way to go but it would appear Theresa May and her teams charm offensive across Europe over the summer may be working."

Earlier, Bloomberg reported that the deadline for Brexit talks has been pushed back again. It said senior officials on both sides are now aiming to finalise the terms of the divorce by the middle of November, rather than 18 October.