LONDON (Reuters) - Sterling recovered earlier losses and Britain’s top stock index gave up gains on Wednesday as traders pointed to reports the European Union will likely strike a conciliatory stance when responding to Britain’s formal request to leave the bloc.
Having earlier hit an eight-day low of $1.2377, sterling rose to as high as $1.2460 by 0852 GMT, up almost half a cent from ten minutes earlier. It had eased to $1.2443 by 0910 GMT, leaving it flat on the day.
The pound simultaneously hits the day’s high of 86.57 pence per euro, up 0.3 percent on day.
“There is some reference in the market that maybe the components of Brexit could be a little softer than is factored into the FX market - what is priced in at the moment is a hard Brexit,” said Mizuho’s head of hedge fund FX sales, Neil Jones.
“So if there is something being constructed by the EU that is a little softer, that would send sterling sharply higher.”
One unconfirmed news report said the formal EU statement in repose to Wednesday’s UK request to leave would stress the bloc’s desire for an orderly exit and as much agreement with the UK as possible.
Britain’s FTSE 100 index gave up some of its earlier gains as sterling recovered, trading flat. The more domestically-exposed mid caps also traded flat.
Data released at 0830 GMT showed British consumer borrowing slowed by less than forecast in February, although weaker-than-expected mortgage approvals added to recent mixed signals from households ahead of Brexit.
Reporting by Jemima Kelly; Additional reporting by Kit Rees. Edited by Mike Dolan