LONDON (Reuters) - Sterling firmed to a 5-1/2 month high on Monday, ceding earlier losses after the Northern Irish Democratic Unionist Party said it would not support any amendments to the Brexit deal for a customs union with the European Union.
The currency crossed the $1.300 threshold to as much as $1.3011 while against the euro, it strengthened to 85.91 pence (EURGBP=D3).
Morten Lund, a strategist at Nordea Markets, said it raised the chances of Prime Minister Boris Johnson's Brexit deal receiving the nod from parliament this week, if he is indeed able to put the deal to a vote.
Johnson's opponents are hoping to add an amendment that would bind the UK into a customs union.
"The opposition will find it harder to filibuster the government agenda here and make an amendment for a customs union which was seen as way to obstruct the passing of the deal," said Morten Lund
"It looks like if they don't get the customs union through, they might pass the deal that's why the sterling is moving higher."
British gilt yields extended their gains, with the 10-year yield up 6 basis points (GB10YT=RR) at 0.77%. Euro zone bond yields also climbed, with the German 10-year bond yield up 5 bps (DE10YT=RR).
The pound's gains weighed on Britain's blue chip FTSE 100 (FTSE) index, which erased earlier gains to trade flat by 0834 GMT, while the domestically focused FTSE 250 (FTMC) index rose 0.2%.
Interactive graphic showing the moves in sterling against the dollar since 1957
INTERACTIVE: https://graphics.reuters.com/BRITAIN-EU-STERLING/0100B0DP0VN/index.html