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CORRECTED-Pound jumps after Germany's Merkel says Brexit backstop solution possible by Oct. 31

Published 08/22/2019, 09:19 PM
Updated 08/22/2019, 09:20 PM
© Reuters. CORRECTED-Pound jumps after Germany's Merkel says Brexit backstop solution possible by Oct. 31

(Correcting to say pound rose, not fell in 4th para)
LONDON, Aug 22 (Reuters) - The British pound jumped more
than half a cent on Thursday to nearly a one-month high after
German Chancellor Angela Merkel said a solution to the Irish
border issue could be found before the Oct. 31 deadline for
Britain to leave the European Union.
Sterling, trading around $1.2160 GBP=D3 earlier, rocketed
to as high as $1.2265, before settling around $1.2217, up 0.8%
on the day.
Against the euro, sterling rose as high as 90.415 pence
EURGBP=D3 , a more than 1% rise on the day and its highest
since July 29. The euro zone equity benchmark .STOXXE swung into positive
territory and hit the day's high after the comments, while
London's exporter-heavy FTSE 100 .FTSE fell as sterling came
rose. At 1305 GMT, the euro-zone index was up 0.2% while FTSE
was 0.8% lower.
The pound has fallen heavily in recent weeks on fears
British Prime Minister Boris Johnson will take Britain out of
the EU without a transition deal.
However, with investors having bet heavily against the
currency, any sign of a breakthrough in Britain's efforts to
convince the EU to renegotiate the deal is likely to send the
pound jumping, analysts and traders say.
"We are not really any closer to finding a solution. [French
leader Emmanuel] Macron has met Johnson with scepticism. The
markets are biased towards the optimistic view because everyone
still thinks that given the negative consequences of no-deal
Brexit for both sides a solution will be found," said Esther
Maria Reichelt, an FX strategist at Commerzbank.
"It's a classic prisoners' dilemma."

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