London —The British pound gyrated on Tuesday as rumours and uncertainty about the Brexit endgame played havoc with investors’ nerves. Prime Minister Theresa May launched a new diplomatic push to avert a no-deal Brexit and secure a new delay to the date for leaving the bloc. Sterling bobbed briefly above 1.31/$ in late-morning foreign exchange deals, but then fell back against the dollar. “In a clear example of how headline driven the pound is at present, there’s been a swift move higher and just as quick a drop back lower as the latest round of Brexit rumour and counter-rumour hit the news wires,” said David Cheetham, an analyst with XTB.

He cited reports, later denied, that German Chancellor Angela Merkel was willing to grant a five-year time limit on the backstop, which saw traders rush to buy the pound in anticipation of a breakthrough. “However, the gains were fleeting and they were promptly handed back when it was confirmed the reports were untrue and we can expect more o...

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