Pound advances as David Cameron secures deal to avert Brexit

The pound rose for a second day against the dollar as European Union leaders reached a deal aimed at keeping the UK in the bloc.

"Agreement UK in EU done," Lithuanian President Dalia Grybauskaite said on Twitter as the bloc's heads of government met for dinner at the end of a second day of their summit in Brussels Friday. "Drama over." In a separate post, EU President Donald Tusk said there was "unanimous support" for the proposal.

UK Prime Minister David Cameron has been under the spotlight after it was revealed an offshore account was set up by his ...
UK Prime Minister David Cameron has been under the spotlight after it was revealed an offshore account was set up by his father.  Photo: Bloomberg

Sterling climbed to its highest level after the tweets, reversing a loss of as much as 0.6. UK Prime Minister David Cameron had been aiming to seal an agreement that he could sell to the British people in a vote that can be called as early as June.

"The market sees this as a positive," said Shaun Osborne, chief foreign-exchange strategist in Toronto at Bank of Nova Scotia. Even still, he advised clients to sell into the currency's strength because "the deal is not the issue -- it's whether Cameron can sell the deal at home."

The UK currency climbed 0.3 per cent to $US1.4379 as of 4:32 pm New York time. It added 0.1 per cent to 77.36 pence per euro.

With traders already pushing back bets on the timing of a Bank of England interest-rate increase, uncertainty about the details of the referendum on leaving the world's largest trading bloc had been causing further concern, helping push down the pound against most of its Group-of-10 peers this year. Securing concessions palatable to the British public would bolster Cameron's chances of securing a vote in favor of remaining, while the announcement of a date would give traders more clarity.

Expectations for price swings in the pound against the euro during the next six months climbed to the highest since 2011 as the talks continued on Friday.

Bloomberg