Pound to dollar exchange rate: Sterling surges as Government considers paying to enter EU single market after Brexit

Pound surge: Sterling's exchange rate against the dollar is at its highest in three weeks
AFP/Getty Images
Fiona Simpson1 December 2016
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The pound surged following the announcement that the Government is prepared to consider paying for Britain to access the European single market after Brexit.

Sterling was up one per cent against the dollar at 1.26 on Thursday - its highest level in three weeks.

Against the euro, the pound surged 0.63 per cent to 1.18 euro, aided by the eurozone currency's struggles in the face of the Italian referendum on constitutional changes on Sunday.

The vote could crush Prime Minister Matteo Renzi, who is facing opposition from populist opponents.

Brexit Secretary David Davis told MPs that ministers want to "get the best possible access for goods and services to the European market" after the UK has left the bloc and suggested the Government is open to the possibility of making contributions to the EU to secure that access.

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.

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