• Overnight implied volatility soars to highest since March

LONDON: Sterling rose on Tuesday on the back of a broadly weaker dollar on US presidential election day, ignoring that the European Union and Britain have so far failed to reach an agreement on three persistent sticking points in Brexit talks.

The impasse suggests any breakthrough in securing a trade deal is still a way off, limiting sterling's gains against the euro, though most investors remain hopeful a deal can be struck this month.

Sterling was last trading up 0.6% at $1.3075, its highest in a week. The pound has gained about 4% in the last six months as the dollar's strength faded.

Versus the euro, the UK currency was up 0.3% at 89.76 pence. It has lost nearly 3% against the common currency in the last six months.

Trading in the pound was calm earlier in the day, with investors rushing into the derivatives market to buy protection against unexpected near-term moves.

Sterling overnight implied volatility gauges rose to their highest since March at nearly 19%, reflecting traders' angst ahead of the US election and expectations of near-term swings in the currency, with the time for a Brexit deal rapidly running out and England set to enter a coronavirus lockdown this week.

"It's a bit of a perfect storm for the pound," said Neil Jones, head of European hedge fund sales at Mizuho.-Reuters