Pound soars as Michel Barnier hints at Brexit breakthrough

Sterling has been languishing in the doldrums for much of August.

EU’s chief Negotiator for Brexit helped sterling rally on Wednesday (PA)
EU’s chief Negotiator for Brexit helped sterling rally on Wednesday (PA)

Sterling received a much needed boost on Wednesday following comments from Michel Barnier suggesting that the European Union is ready to offer the UK a bespoke Brexit deal.

The bloc’s chief negotiator said the EU is “prepared to offer a partnership with Britain such as has never been with any other third country”, which resulted in the pound spiking.

The British currency jumped almost 1% versus the dollar and euro to touch 1.300, a three-week high, and 1.111 respectively.

Sterling had been languishing in the doldrums for much of August as fears of a no-deal Brexit intensified, with several high profile figures talking up the prospect of Britain crashing out of the EU without an agreement in place.

But Neil Wilson, chief market analyst at Markets.com, said: “The market clearly sees this as sterling positive, but without any concrete offer on the table there is still a degree of scepticism that we are seeing played out.

“Barnier’s comments are clearly positive for the Brexit negotiations and indicates that we are about to get some sort of deal before the end of the year.

“The EU is coming around at last, it has strong form on eventually doing a deal that works, but we must question what kind of concessions the UK will need to make.

“It looks increasingly like Britain will be rule takers, not rule makers.”

Also driving the pound higher was Brexit Secretary Dominic Raab, who said he was confident that an agreement between the two sides is “within our sights”.

The FTSE 100, meanwhile, ended the day down 54.01 points, or 0.71%, at 7,563.21.

David Madden, of CMC Markets UK, said: “The FTSE 100 is enduring a broad based sell-off as mining, housing, retail and oil stocks are lower this afternoon.

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“The surge in sterling on the back of Barnier’s comments about Brexit sent the internationally exposure index even lower.”

Smurfit Kappa shares were on the slide after Venezuela’s socialist government seized control of its operations in the country and detained two employees over allegations including price fixing and destabilising the economy.

Its subsidiary Smurfit Kappa Carton de Venezuela (SKCV) will be under government control for the next 90 days.

Shares close down 56p at 3,236p.

Centrica shares nudged up, despite British Gas paying out £2.65 million after regulator Ofgem found it overcharged more than 94,000 customers switching provider and wrongly imposed exit fees on thousands of households.

The energy watchdog said the Centrica-owned business incorrectly charged 94,211 customers its more expensive standard variable rate tariff after they decided to switch to a new supplier, due to a system error.

Shares closed up 0.9p at 142.85p.

In Europe, France’s CAC ended the day up 0.33% while Germany’s DAX closed up 0.27%.

A barrel of Brent Crude was trading at 76.5 US dollars, a rise of almost 1%.

The biggest risers on the FTSE 100 were MicroFocus up 37.5p at 1,307.5p, Bunzl up 67p at 2,392p, United Utilities up 11p at 729.4p and Associated British Food up 34p at 2,320p.

The biggest fallers on the FTSE 100 were Tesco down 8.3p at 249.9p, Royal Mail down 15.3p at 464.3p, Standard Life Aberdeen down 10.3p at 319.3p and Fresnillo down 23.2p at 934.6p.

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