British pound sterling street
Pound rallies against dollar and euro on leaked EU document.Reuters

The pound rallied against major global currencies on Friday (13 October) after a leaked European Union document suggested the bloc was preparing to begin trade talks with the UK, despite public claims that there was a deadlock between London and Brussels.

At 2:37pm BST, the British currency was up 0.45% against the dollar and 0.21% against the euro changing hands at $1.3324 and €1.227 respectively, as the BBC reported that it had seen documents, penned by the European Council president Donald Tusk, suggesting that EU-UK trade talks could begin in December.

Tusk's office declined comment on the revelation.

The sterling also rose 0.11% against the Swiss franc, 0.10% against the yen and 0.51% against the Canadian dollar, exchanging intraday at CHF1.294, JPY148.945 and CAD$1.6624 respectively, in light of mounting speculation that the Bank of England might be poised to raise interest rates by 0.25% as early as its next Monetary Policy Committee on 2 November.

In the wake of the rally, Commerzbank analysts urged caution. "Current levels are based on the hope that everything will be OK in the end. However, until this reliably emerges there is a considerable risk of the pound collapsing," they wrote in a note to clients.

Lukman Otunuga, research analyst at FXTM, said the pound's relative intraday strength was also boosted by the weakness of dollar.

"While markets are still expecting the US Federal Reserve to raise interest rates in December, concerns over prolonged periods of depressed inflation may cloud the prospect of higher interest rates in 2018.

"The Dollar Index found itself under extreme selling pressure follow recent data releases, with prices trading towards 92.80. Sustained weakness below the 93.00 may encourage a further decline towards 92.50."