Pound sterling rallies after optimistic Brexit comments from Dominic Raab and Michel Barnier

Dominic Raab told the Lords EU committee on Wednesday that he was 'confident a deal is within our sights'

The pound has rallied against the dollar and the euro following bullish Brexit comments from both UK and EU officials.

Sterling rose more than 1 per cent against the greenback to hit $1.3006, and was up 0.99 per cent against the euro to €1.1118.

Brexit secretary Dominic Raab told the Lords EU committee on Wednesday that he was “confident a deal is within our sights”.

He said: “We're bringing ambition, pragmatism, energy and if, and I expect it will be, and if it is matched, we get a deal.”

He said the 17 October deadline for a deal could be pushed back, but added: "I think it is important as we enter the final phase of the negotiations in the lead up to the October council - and the possibility that it may creep beyond that - we want to see some renewed energy.

"We're bringing the ambition and the substance of our white paper on the future relationship and also I think some pragmatism to try and go the extra mile to get the deal that I think is in both sides interests. We need that to be matched obviously, it's a negotiation."

Meanwhile the EU’s chief negotiator, Michel Barnier, said the bloc is “prepared to offer a partnership with Britain such as has never been with any other third country".

"That kind of bullishness has been in short supply of late – if it has ever been there at all – and had a hugely rejuvenating effect on the pound,” said Connor Campbell, financial analyst at Spreadex.

Sterling had been weighed down earlier this week after Theresa May dismissed a warning by Philip Hammond that a no-deal Brexit would significantly impact the UK economy, with investors inferring that a cliff-edge exit had become more likely.