Sterling jumps past 1.28 after report DUP accepts Brexit proposal

Sterling popped back above 1.28 in afternoon trading following a report that the Northern Irish DUP had accepted the Brexit proposals tabled by Westminster, removing the biggest stumbling block to a deal being approved with the European Union.

Citing two EU sources, RTE's Europe Editor Tony Connelly reported that the UK government's key ally in parliament had accepted the latest proposals on the necessary democratic consent from Stormont for its customs proposal.

As 1337 BST, cable was edging up by 0.04% to 1.27879. having earlier hit an intra-day high of 1.2839, marking its best level for five months, but traders appeared wary of pushing it past a key level of technical resistance at 1.2828, where a level of so-called Fibonacci retracement lay.

In parallel, the short sterling strip had steepened as money markets trimmed their implied bet on policy easing by Bank to 17 basis points by 2020 against 20bp during the previous day.

On that note, according to the Daily Mail political editor, Jason Groves, there was "growing frustration in No 10 (and DUP) that 'EU sources' trying to bounce them into further concessions by suggesting a deal is all but done."

DUP leader, Arlene Foster, confirmed that assertion via a post to her personal account on Twitter, saying: "EU sources' are talking nonsense. Discussions continue. Needs to be a sensible deal which unionists and nationalists can support."

'EU sources' are talking nonsense. Discussions continue. Needs to be a sensible deal which unionists and nationalists can support. https://t.co/CpugVBfyBZ

— Arlene Foster (@DUPleader) October 16, 2019

Earlier, in a research note sent to clients, analysts at Barclays Research had said: "A Brexit breakthrough seems increasingly likely and could boost sentiment towards domestic Europe, particularly Financials. While headline risks remain elevated on both fronts, we think it is prudent to cut some of our defensive hedges and add to UK domestics."

- More to follow --