Pound climbs amid rumours of Brexit deal

Rumours of an agreement between the UK and EU on financial services sent the pound higher yesterday, supported by the outlook from the Bank of England as it maintained interest rates.

Sterling jumped 1.5% to $1.297 and tracked 0.86% higher against the euro to 1.138.

Earlier in the day, reports suggested that a deal had been struck “in principle” which would give UK financial services continued access to the bloc after Brexit.

Omar Ali, UK financial services leader at EY, said: “Brexit uncertainty has hovered over the financial sector since the referendum and today’s rumours of a deal in principle is welcome news.

“The importance of the financial services sector to the UK economy is evident by the rise in the value of sterling as reports filtered out.

“We shouldn’t get too carried away though. Any proposals based on current EU equivalence frameworks would not provide the access that firms currently get through EU passport, so the depth, breadth and enforcement mechanisms of any new arrangements will be critical.”

The biggest risers on the FTSE 100 were BT Group, up 20.7p to 261.25p, Smith & Nephew up 83.5p to 1,357p, Just Eat up 38.4p to 646p, and Melrose Industries up 9.8p to 178.45p.

The Bank of England’s monetary policy committee voted to hold interest rates at 0.75%. Encouraging words from governor Mark Carney regarding the health of the economy should a Brexit deal be achieved helped support the boost to the pound.

In Europe, the French Cac was down 0.15% but the German Dax was up 0.18%.