Pound rebounds after EU sparks hopes for ‘Brexit’

Bloomberg

The pound climbed towards a three-month high after European Union chief negotiator Michel Barnier rekindled optimism for a Brexit deal before the week is out.
Sterling is leading gains among of Group-of-10 currencies, after Barnier said a deal is possible this week but talks remain tough. Options prices showed that investors are positioning for
further wider swings in the UK currency, with one-week implied volatility in the pound-dollar pair trading higher for a fourth day.
The currency has swung between gains and losses as traders reposition for what could be a swift and brutal move in the currency when the outcome of this week’s negotiations becomes clear.
Time is running out for negotiators to present a legal text to Thursday’s meeting of European leaders, though there is already speculation an emergency summit could be held next week, amid fears of a hard Brexit on October 31.
“Anything right now from UK or EU officials that points to a deal and points to a deal now will shoot the pound higher,” said Neil Jones, head of currency sales at Mizuho Bank. Still, “there is doubt over whether there is sufficient time to put a deal together this week, which will limit the pound gains.”
Hedge funds and asset managers have been paring their bets on a weaker pound, according to the Commodity Futures Trading Commission.
Sterling rose as much as 0.7% to $1.2698, approaching October 11’s peak of $1.2707, the highest level since July 1. It gained 0.4% to 87.14 pence per euro.