Pound rises against dollar amid reports DUP will back Theresa May's Brexit deal

Sterliing gained 0.3% on Friday, extending its rally on Thursday on hopes that no-deal Brexit will be avoided

The pound rose against the dollar and the euro on Friday, putting it on track for its best week since 2017, as speculation grew that a no-deal Brexit is becoming less likely.

Sterling was boosted by a report that the Democratic Unionist Party has agreed that it will back Theresa May’s Brexit deal if it includes a clear time limit to the Irish backstop.

The DUP voted against Ms May’s deal when it was put to parliament earlier this month but will support her “Plan B” in next Tuesday’s Commons vote, The Sun reported.

While the EU ruled out a time limit, the news helped to increase optimism that some form of compromise can be reached in order to get the deal through.

The pound was 0.4 per cent higher on Thursday night passing $1.30 to its highest level since 8 November.

Sterling gained a further 0.3 per cent against the dollar on Friday at $1.3101 and has risen almost 2 per cent against the this week.

Pressure is mounting on the prime minister to take a disorderly exit off the table as the chancellor ramped up his warnings of a “significant hit” to the economy if the UK leaves the EU without an agreement.

The Chancellor refused to rule out resigning from the government if Theresa May decides to pursue a no-deal Brexit.

It comes after Amber Rudd, the pro-EU work and pensions secretary, also hinted she could resign from the frontbench to thwart a no-deal exit from the bloc.

Asked repeatedly whether he would remain in Number 11 under that scenario, Mr Hammond told the Today programme: “I'm not going to speculate because a lot depends on the circumstances, what happens.

Elsewhere, the euro rebounded on Friday after signs of more caution from the European Central Bank about raising interest rates. ECB President Mario Draghi warned on Thursday that a dip in the euro zone’s economy could be worse than had been thought.

The FTSE 100 was up 0.1 per cent to 6,827.31.