Downing Street has dismissed reports that Theresa May has struck a preliminary deal with Brussels to offer City firms continued access to European markets after Brexit.
The pound surged overnight in response to speculation that white smoke was emerging in the talks with the EU, which have entered their critical final phase.
However Number 10 described the report in The Times as "speculative" while the EU's chief Brexit negotiator Michel Barnier said the claims were "misleading", as negotiations are ongoing.
It comes amid confusion in Westminster over how close politicians are to achieving a deal after Dominic Raab, the Brexit secretary, suggested that overall agreement could be reached within weeks.
EU officials are ramping up preparations for a no-deal, as no progress appears to have been made since the meeting of the European Council two weeks ago, where EU leaders scrapped plans for an emergency November summit due to lack of movement over Brexit.
News of a tentative financial services deal between British and European negotiators saw sterling rise by nearly 1 per cent against the dollar overnight at 1.28 US dollars.
Such an agreement would guarantee UK firms access to EU markets as long as domestic regulations remained broadly aligned with those set by Brussels.
City firms employ more than 1.1 million people in the UK and contributed more than £119bn to the economy last year.
The prime minister's official spokesman told a Westminster briefing: “When the BBC chooses to lead its bulletin on a speculative page 14 news story, it is time for everybody to take a deep breath.”
"This is speculation. While we continue to make good progress, agreeing new arrangements for financial services negotiations are ongoing."
And Mr Barnier tweeted: "Misleading press articles today on Brexit and financial services.
"Reminder: EU may grant and withdraw equivalence in some financial services autonomously.
"As with other third countries, EU ready to have close regulatory dialogue with UK in full respect for autonomy of both parties."
It comes after the government said there were no set date for negotiations to finish, backtracking on a letter from Mr Raab that suggested a deal would be finalised by November 21.
He wrote: "I would be happy to give evidence to the committee when a deal is finished and currently expect November 21 to be suitable."
After the letter became public, the Department for Exiting the European Union tried to row back in a clarifying statement, which said "there is no set date for the negotiations to conclude" and November 21 "was the date offered by the chair of the select committee for the Secretary of State to give evidence".
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