Sterling has jumped to its highest level against the U.S. dollar since the Brexit vote.
The two countries' foreign ministers had agreed to work together for a divorce deal that would maintain a close relationship between the European Union and Britain.
The pound also climbed against the euro (GBP/EUR), reaching highs of 1.1291.
The gains came after Bloomberg reported that the Spanish and Dutch finance ministers had agreed to work together for a Brexit agreement that maintains close ties between the European Union and Britain, in what would be a clear divergence in views among the 27 European Union member states about how to treat Britain after it leaves. It gained 0.1 per cent to 88.80 pence per euro while the yield on United Kingdom 10-year government bonds gained three basis points to 1.34 per cent. Visit MarketWatch.com for more information on this news.
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Sterling has been pressured earlier this week by signs of continued divisions between the United Kingdom and EU over Brexit, amid reports that banks are beginning to enact their contingency plans to set up European headquarters to avoid losing access to the European market in the event of a so-called hard Brexit. As the bill makes it way through Parliament I would expect key figures to have their say which will ultimately move Sterling.
Against the euro, which has rallied since minutes from the European Central Bank on Thursday pointed to tighter monetary policy in the euro zone, sterling was up 0.3 percent at 88.64 pence per euro EURGBP=D3.
As a result, the pound hit the highest level against the US dollar (GBP/USD) since the Brexit referendum, nearing the 1.37 barrier, while the pound also climbed against other currencies, making notable gains against the Canadian dollar, Australian dollar, New Zealand dollar, and South African rand. Still, the rally was greeted with caution even by top sterling bulls, who said a more meaningful development is needed to maintain the currency's strength.