UPDATE 1-Sterling jumps to highest since May on Brexit deal hopes

(Updates with context and prices)
By Saikat Chatterjee and Olga Cotaga
LONDON, Oct 15 (Reuters) - Sterling surged on Tuesday to its
highest level against the dollar and the euro since May while
British stocks and government bond yields also rose after
Bloomberg said British and EU negotiators were closing in on a
draft Brexit deal.
Already higher on the day, the pound jumped above its
200-day moving average, a closely watched technical level, after
the report as investors watched for any signs of a breakthrough
in the Brexit talks.
The British currency climbed 1.5% on the day to $1.28
GBP=D3 , a five-month high and also the first time it has gone
above the 200-day moving average of $1.2713 since May.
It also rose by the same margin against the euro and was
last trading 1.4% higher at 86.29 pence EURGBP=D3 .
Sterling has risen nearly 5% higher over the past week as
investors rushed to reprice the prospect of a last-minute Brexit
deal by the end of Oct. 31 deadline.
"The reaction from the markets shows they want to get this
deal over and they are ready to push the button at the slightest
sign of a deal," said Morten Lund, a senior FX strategist at
Nordea.
But he said he was "a bit more sceptical about the outcome"
given how little time remained to negotiate and the difficulties
of getting a deal through the British Parliament.
Talks aimed at reaching a Brexit deal with Brussels are
continuing but there is still work to do, British Prime Minister
Boris Johnson's spokesman said. Kenneth Broux, a corporate FX strategist at Societe
Generale, said he expected the pound to rally to $1.30 and even
$1.35 if a deal gets through parliament, where Johnson lost his
majority just weeks into his term.
The FTSE250 of UK mid-cap stocks .FTSC rose and European
equity benchmarks extended their gains on the news.
British government bond yields shot higher. The two-year
gilt yield GB2YT=RR rose to its highest level since Sept. 16
at 0.575%, up 7.5 basis points on the day.
The move rippled into the broader European bond market with
10-year German government bond yields up 4 basis points to
-0.41%, their highest in two and a half months. DE10YT=RR
"The more uncertainty you remove the better for investors.
If the prime minister and the EU were now to agree a deal, then
the market would take that positively," said Edmund Shing,
global head of equity derivatives strategy at BNP Paribas.
Britain must reach a Brexit deal with the bloc by the end of
Tuesday for it to be approved at a leaders' summit this week,
the bloc's officials and diplomats said. Otherwise, Britain's
scheduled departure date of Oct. 31 could be delayed.
Officials said it was still possible to reach a deal over
customs arrangements on the island of Ireland by the Tuesday
deadline, and if not, an extra summit could be called before the
end of the month. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Pound and bonds https://tmsnrt.rs/2q8QBwL
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>