LONDON (Reuters) – Sterling jumped against the dollar and the euro while British stock prices and government bond yields rose in late afternoon trading on Tuesday after a Bloomberg report that British and European Union negotiators were close to a Brexit draft deal.
The pound jumped more than 1% versus the dollar to $1.2742 and by a similar margin against the euro to 86.31 pence. The FTSE250 of UK mid-cap stocks was last up 1.6%.
“A deal between the UK and EU was 60 percent in the price and now we stand to see if the remaining 40 pct come into play so the pound is rallying,” said Stephen Gallo, European head of FX markets at BMO.
British government bond yields shot higher. The two-year gilt yield rose to its highest level since Sept. 16 at 0.575%, up around 7.5 basis points on the day.
The move rippled over into the broader European bond market with the 10-year German government bond reaching 2.5 month highs, up 4 basis points at -0.41%.
European equity benchmarks accelerated their gains on the news with the STOXX 600 over 1%, Germany’s up 1.2%, France’s CAC40 up 1.2%
(Reporting by the London Markets Team; Editing by Mike Dolan)