The British pound gyrated yesterday as rumours and uncertainty about the Brexit endgame played havoc with investor 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 both the dollar and the pound.

“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 of this sort of thing in the coming days,” Cheetham predicted.

Belgium said yesterday it is to host a mini-summit of the European Union members most exposed to the dangers of a no-deal Brexit tomorrow.

Also yesterday, the IMF issued a stern warning, saying a “no-deal” Brexit would send the British economy into severe shock.

In a whirlwind tour, the British premier met Chancellor Angela Merkel in Berlin and President Emmanuel Macron in Paris in a last-gasp bid to keep her country from crashing out on Friday.

The pound is set for “another wild week” amid uncertainty about the outcome of the talks, said FXTM analyst Lukman Otunuga.

“When dealing with Brexit, one should always expect the unexpected and this will remain the mantra until more clarity is provided,” he said.

European and US stock markets, meanwhile, dropped as traders detected cooler relations between the United States and China over trade than they had previously hoped for, with flaring trade tensions between the US and the European Union adding to worries.

President Donald Trump yesterday lashed out at the EU, vowing to slap tariffs on billions in EU imports in retaliation for subsidies to aviation giant Airbus.

Markets, meanwhile, remain on tenterhooks on the eve of the European Central Bank’s interest rate decision – and publication of the United States Federal Reserve’s meeting minutes.

Earnings season also kicks off in earnest this week, with expectations low but observers hoping for some positive forward guidance.