The pound moved to a two-and-a-half-month high against the dollar on Wednesday, on growing hopes a Brexit deal could be within reach.
GBP/USD rose 0.31% to $1.3281.
Hopes for Brexit a deal were given a boost on Wednesday amid reports that French President Emmanuel Macron is ready to cave in on demands from the U.K. for full sovereignty over its waters that will likely rein in access for French fisherman.
Irish Minister Micheál Martin on Tuesday said a “landing zones” for an agreement were within sight just a day ahead of the European Union Summit, when EU Brexit negotiation Michel Barnier is set to brief EU leaders following two weeks of talks with the UK.
An agreement could be made as soon as Monday, the Telegraph reported, and be approved within weeks, most likely at the next EU Summit on Dec. 10. The European Parliament would then need to rubberstamp the agreement to ensure a deal is in place before the end of the transition period on Dec, 31.
As well as Brexit hopes, higher-than-expected inflation lifted the pound, but analysts said inflation is likely to slow in the months ahead.
U.K. consumer prices rose 0.7% in the year through October, after a 0.5% rise in September, the Office for National Statistics reported. That was ahead of the 0.6% growth expected.
“Looking ahead, we expect UK inflation to fall back close to 0.5% year-on-year in November and December, not least reflecting the intensification of the pandemic, although the closure of non-essential retailing and many services will mean that prices of many items will need to be imputed by the Office of National Statistics,” Daiwa Capital Market said.