Sterling strengthens to six-month highs versus euro on Farage comments

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

(Reuters) - Sterling jumped 1% versus the dollar on Monday GBP=D3 and scaled six-month highs to the euro as Brexit Party leader Nigel Farage said he would not challenge the Conservative party in 317 of the 650 seats up for grabs in upcoming elections.

“The Tories will be heaving a sigh of relief as it reduces at the margin the prospect of a hung parliament,” said Neil Mellor, FX strategist at BNY Mellon.

In a significant boost for Prime Minister Boris Johnson ahead of the Dec. 12 election, Farage said he did not want anti-Brexit parties to win, so was standing down candidates.

Sterling touched a high of $1.2896 though later eased off that level to stand some 0.8% higher around $1.2884. It rose as high as 85.62 pence EURGBP=D3.

British government bond prices fell as Farage spoke and were down about 30 ticks from before the announcement.

Reporting by Elizabeth Howcroft and Bill Schomberg; editing by Sujata Rao