The pound spiked on Thursday after prime minister Boris Johnson and his Irish counterpart, Leo Varadkar, said that that they thought a Brexit deal was still possible.
The currency jumped by more than 0.5% against the dollar to (GBPUSD=X) £1.226 soon after the leaders released a joint statement saying that they had “agreed that they could see a pathway to a possible deal.”
Varadkar and Johnson said that they had a “detailed and constructive discussion” at Thornton Manor hotel near Birkenhead in the north-west of England.
“Both continue to believe a deal is in everybody’s best interest,” the statement said.
“Their discussions concentrated on the challenges of customs and consent,” it said, referencing the UK’s desire to leave the European Union’s customs union, and whether Northern Ireland should leave too.
The meeting, which lasted several hours, was billed as one that had the potential to break the impasse over the Northern Ireland backstop, which is designed to prevent a hard border on the island of Ireland.
Officials would “engage intensively” on these issues, the two leaders noted.
The pound had fallen on Wednesday after the EU’s chief Brexit negotiator, Michel Barnier, said the EU was “not really in a position where we are able to find an agreement.”
He said the EU had “serious concerns” about Boris Johnson’s Brexit proposals.
On Tuesday, Downing Street said a Brexit deal was “essentially impossible”, while Varadkar had warned that he thought it would be “very difficult” to reach a deal before 31 October.