Sterling jumps on report Brexit negotiations have entered "tunnel" stage

FILE PHOTO: UK pound coins plunge into water coloured with the European Union flag colours in this illustration picture, October 26, 2017. REUTERS/Dado Ruvic

LONDON (Reuters) - Sterling jumped to as high as $1.3442 on Tuesday after Times Radio said that Brexit trade deal talks have entered the “tunnel” stage of negotiations.

The pound surged to hit a three-month high of $1.3442 at 1610 GMT, gaining half a percent in around 5 minutes.

“Tunnel was the key word that pushed the pound higher,” said Neil Jones, head of FX sales for financial institutions at Mizuho. “The market has taken this comment as a deal is very close.”

The “tunnel” is a term for an intense final stage of secretive, make-or-break negotiations.

The pound held on to its gains, and was at $1.3435 at 1624 GMT, up 0.8% on the day. Against a stronger euro, it was down around 0.2% on the day at 89.69 pence, having erased some losses after the news.

Reporting by Elizabeth Howcroft; editing by Thyagaraju Adinarayan