The pound was on track for its first weekly gain in a month, after climbing on a report that the European Union’s chief Brexit negotiator may be prepared to offer the U.K. a two-year transition period.
Sterling rose to the highest in nearly two weeks after German newspaper Handelsblatt said Michel Barnier will seek support for the proposal at a meeting of EU ambassadors in Brussels on Friday. The offer would be tied to Britain meeting its financial obligations to the bloc, the report said, leading the pound to recover late on Thursday from a selloff caused by Barnier saying Brexit talks had reached an impasse.
The pound rose 0.4 percent to $1.3311 by 8:58 a.m. in London, taking gains for the week to 1.9 percent. Its five-day rally makes the longest winning streak since June, with a move above an Oct. 4 high seeing stops and stop entries filled, traders in Europe said. Sterling also strengthened 0.4 percent to 88.84 pence per euro.
The Handelsblatt report “prompted an aggressive sterling spike,” said Canadian Imperial Bank of Commerce’s head of Group-of-10 currency strategy Jeremy Stretch in emailed comments. This is still playing out but “we would use the sterling spike as an opportunity to sell the pound at better levels,” he said, adding it remains highly unlikely that EU leaders would sanction the opening of talks on a post-EU transition deal next week.