Pound spikes to three-week high after Brexit minister hints at EU single market access

Sterling is now at its highest levels since the aftermath of Donald Trump's surprise election win

The pound surged to its highest level in three weeks after Brexit minister David Davis said the UK would consider making payments to the EU budget in return for access to EU.

Sterling is now at its best level since the aftermath of Donald Trump’s surprise election win, which briefly caused the currency to rise.

Sterling was up 1 per cent against the dollar at 1.26, after Mr Davis told MPs in the House of Commons that ministers want to “get the best possible access for goods and services to the European market” after the UK has left Europe.

The pound has also extended its gains against the euro rising by 0.63 per cent to €1.18 euro, aided by the eurozone currency’s struggles in the face of the Italian referendum on Sunday.

Sterling fell back slightly from its gains trading at $1.257 against the dollar at market closing time.

Neil Wilson, senior market analyst at ETX Capital, said: “Sterling is on the tear this morning on hopes for a soft Brexit.”

“David Davis said the UK could contribute to the EU budget in return for access to markets and that has fuelled a rally for the pound.

“Meanwhile the pound has reached its best level against the euro since September as the clouds of uncertainty over Italy’s referendum weighs on the single currency. We could get a further fall in the euro if Italy votes No on Sunday.”

The rise in sterling comes despite data showing output in Britain’s manufacturing industry eased back last month.

Craig Erlam, chief market analyst with retail brokerage Oanda, said: “The idea that single market is still a priority is a move away from the ‘hard-Brexit’ line.

“Since the two or three major selloffs we saw earlier this year, the Bank of England has changed its stance to holding rates next year, the data has been better and now the rhetoric has softened.”

During the debate, Mr Davis said he was keen not to rule out any option before the end of March, the government’s self-imposed deadline for triggering article 50.

“There is one chance in this negotiation, it’s unlike almost anything else that comes in front of this house, anything else we can come back and repeal it, change it or amend it,” he said. “This is a single-shot negotiation, we have to do the analysis first.”

Mr Davis said he is due to appear before the Brexit committee in December and that members of the committee had visited the Department for Exiting the European Union.

Earlier this week a note being carried by an aide into Downing Street was photographed, suggesting the Government wanted to “have its cake and eat it”.

It said that Britain is likely to pursue a “Canada plus” trade deal with the EU, adding that remaining a member of the European Economic Area would be “not good”.