By Barbara Kollmeyer, MarketWatch
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 /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.5955% 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 /zigman2/quotes/210598409/delayed UK:UKX +1.10% , 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 /zigman2/quotes/202285510/delayed UK:LLOY -1.46% and the Royal Bank of Scotland /zigman2/quotes/209265718/delayed UK:RBS -1.54% each rallied over 5%, while multinationals including GlaxoSmithKline /zigman2/quotes/200381158/delayed UK:GSK +1.99% and Unilever /zigman2/quotes/205449809/delayed UK:ULVR +2.57% lost ground.