Sterling shoots above $1.30 on Brexit hopes in jittery session
* Reports 'Malthouse Compromise' is dead supports sterling
* May heads to Brussels to try and push Brexit talks
* UK pay growth fastest in a decade in late 2018
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
(Adds details, quotes)
By Tommy Wilkes and Tom Finn
LONDON, Feb 19 (Reuters) - Sterling shot past $1.30 on
Tuesday on hopes that Prime Minister Theresa May will make
progress in seeking changes to her Brexit deal with the European
Union, although some traders struggled to explain the size of
After edging higher for much of the day, the pound then
jumped in late European trading - rising almost one percent
versus the dollar by 1615 GMT to hit its strongest since Feb. 5
, at $1.3050. The pound was headed for its biggest
one-day gain since January.
Against the euro, the British currency added 0.7 percent to
86.93 pence per euro.
"I'm fairly certain it's not news-related and it's due to
technical factors," said Neil Mellor, currencies analyst at BNY
Mellon, referring to some large buy orders reportedly in the
market and triggered when sterling hit $1.30.
Some strategists pointed to media reports that May was
dropping the so-called 'Malthouse compromise', a Brexit proposal
that has united both eurosceptic and pro-EU factions within her
divided Conservative Party.
Markets appear to have taken the media reports as a sign
that Britain is becoming more realistic in renegotiating its
agreement with Brussels, Nomura analyst Jordan Rochester said in
a note to clients, amid broader hopes that the EU and UK are
making progress in their talks.
"By default seeing both sides take action at this stage
lowers the markets' hard Brexit probability by a small margin,"
Rochester said, adding that Nomura remained long sterling.
May will meet EU Commission chief Jean-Claude Juncker in
Brussels on Wednesday, pressing on with efforts to find a way to
get their Brexit deal through Britain's parliament and overcome
domestic opposition to arrangements for the Irish border after
Still, the size of the move against both the dollar and the
euro underlined the sensitivity of sterling ahead of Brexit.
With just six weeks until Britain is due to leave the bloc,
May has yet to win the support of British lawmakers for her deal
and investors are skittish.
Economic data has assumed less importance in recent months
as the scheduled Brexit departure date of March 29 approaches
but decent wage growth data on Tuesday, though slightly below
expectations, did the pound no harm.
Despite the wage growth, markets have pared back their
expectations for Bank of England monetary policy tightening this
year, given the uncertainty over the sort of Brexit Britain is
"The most recent data on the UK labour market continues to
be strong on the whole," said David Cheetham, market analyst at
online broker XTB.
British opposition Labour leader Jeremy Corbyn said his
party was keeping all options open on Brexit, including another
May has roundly rejected Labour's proposal for a permanent
customs union with the EU.
Concerns about Britain's economy were underscored by
Japanese carmaker Honda's announcement on Tuesday that it would
be closing its UK plant, leading to the loss of 3,500 jobs.
Honda said the decision was unrelated to Brexit.
(Editing by Gareth Jones)
First Published: 2019-02-19 12:32:11
Updated 2019-02-19 19:33:36
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.