Sterling jumps on Barnier sounding upbeat at EU Parliament

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

By Olga Cotaga

LONDON, Oct 21 (Reuters) - Sterling jumped to a one-week high against the U.S. dollar on Wednesday after the European Union's Brexit negotiator said on Wednesday that a new trade deal with Britain was "within reach".

The pound rose 0.9% to $1.3065, its highest since Oct. 14. The British currency also rose against the euro by 0.5% at 90.83 pence on the comments.

"An agreement is within reach if both sides are willing to work constructively, compromise and working to make progress on the basis of legal texts and if we are able in the coming days to resolve the sticking points," Michel Barnier said.

Kenneth Broux, head of corporate research at Societe Generale, said the fact that Barnier was speaking in front of the EU Parliament could have meant he sounded more optimistic, giving reason for the hungry traders to buy sterling.

"The market doesn't sit there thinking 'there isn't going to be a deal, we should be trading at $1.25'. The market wants to rally. Any positive soundbites that do come out are being jumped on as a reason to buy," Broux said.

Having failed to reach a trade agreement by the self-imposed deadline of mid-October, Britain and the EU are now aiming to seal a deal by the end of this month.

If Britain leaves the bloc on Dec. 31 without a deal, it would be trading with its biggest partner on World Trade Organization (WTO) rules, which include quotas and tariffs.

Apart from Brexit, Britain is dealing with a rise in new coronavirus cases.

COVID measures in England might need to be tightened and deaths are likely to increase as a second wave of coronavirus infections in England picks up pace, deputy chief medical officer Jonathan Van-Tam said on Tuesday.

Britain's government borrowing in the first half of the financial year was more than six times higher than before the COVID-19 pandemic.

Inflation in Britain rose 0.5% in September year-on-year, higher than the 0.2% inflation seen in the previous month. Transport costs, and restaurant and cafe prices have made the biggest contribution to the inflation rise, the Office for National Statistics said.

(Reporting by Olga Cotaga; Editing by Alison Williams)