The pound rallied to the highest since November on a report that Brexit could be delayed beyond the March deadline, before paring gains as the government ruled out an extension.

The currency climbed as much as 0.8 per cent after the Evening Standard newspaper cited unidentified cabinet ministers as saying a delay to the March 29 Brexit deadline was looking increasingly likely. Sterling then slipped back as a spokeswoman for Prime Minister Theresa May said it wasn’t government policy to extend Article 50.

The size of the move shows the market is poised to jump on good news, said Credit Agricole SA’s head of Group-of-10 currency strategy Valentin Marinov. May’s Brexit deal is widely expected to be rejected by Parliament in a vote on Tuesday.

“There remains an overhang of pound shorts,” said Marinov. “The squeeze in the event of more positive developments could be brutal and propel the pound back to levels last seen in the first half of 2018.”

The pound was up 0.4 per cent at US$1.2794 by 11:23 a.m. in London, after rising to US$1.2851, the highest since Nov. 26. The currency is heading for a fourth weekly gain, its best run in nearly a year, after a bruising 2018 saw it lose more than 5 percent against the dollar on fears of the U.K. crashing out of the European Union without a deal.

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