* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv (Recasts with Raab comments, adds quote, updates prices)
LONDON, Oct 31 (Reuters) - Sterling rallied on Wednesday after Britain’s Brexit Secretary said a divorce deal with the European Union could be reached by the end of November.
Dominic Raab’s suggestion that a deal is imminent saw the pound trade up as much as one percent against the euro and the dollar after weeks of losses.
Traders’ fears about the lack of progress in Britain’s EU divorce talks less than five months before Brexit has led to the currency weakening 4 percent in October.
But a deal is now firmly in sight, Raab said in a letter dated Oct. 24 to the chairman of parliament’s Brexit committee, although the issue of Northern Ireland remains.
“No Halloween scares today, instead we finally have a concrete date from Raab regarding a Brexit deal being finalised, and the pound has jumped in response,” said Hamish Muress, a currency analyst at OFX. “Of course we will have to wait to see if this date can be stuck to.”
Investors are turning their attention to a Bank of England monetary policy meeting on Thursday, when it is expected to keep interest rates on hold and detail conditions necessary for policy tightening.
Some are preparing for more-hawkish-than-expected signals from the central bank.
“The BoE might well convey a surprisingly stoical position,” said Neil Mellor, senior currency strategist at BNY Mellon.
“The bank appears intent upon managing growth in accordance with an economy subject to increased capacity constraints in an aging cycle,” he said.
The BoE’s push to normalize policy in the face of significant risks to the British economy from Brexit has been a source of puzzlement for some investors.
“We have questioned whether the bank’s primary motivation has been the accumulation of ammunition to counter any Brexit-related fall-out,” WorldFirst head of FX strategy, Jeremy Cook said.
After Raab’s remarks became public, sterling surged versus the dollar to trade at $1.2831 before settling up half a percent on the day. Versus the euro it rose 0.7 percent to 88.43 pence, its largest daily gain since August.
Options pricing is pointing to increased concerns about the UK outlook heading into 2019, and mounting angst over Brexit means the market is no longer fully pricing-in an interest rate hike next year. (Reporting by Tom Finn; Editing by Jon Boyle and Peter Graff)