Sterling rallied more than half a percent to hit a two-day high after a media report that Britain would tell Brussels it was prepared to stay in the European Union’s customs union after a transitional arrangement.
Britain will tell Brussels it is prepared to stay in the customs union beyond 2021 as ministers remained deadlocked over a future deal with the bloc, the Telegraph newspaper reported.
Britain is due to leave the EU in March next year although it has secured a transitional arrangement to keep its trade ties with the bloc unchanged until the end of 2020 if a permanent deal can also be reached in the coming months.
The euro hovered near five-month lows on Thursday as investors fretted about the demands of Italian populist parties.
Italy’s anti-establishment 5-Star Movement and the anti-immigrant League may ask the European Central Bank to forgive 250 billion euros of debt as the parties worked to draft a coalition programme.