Pound rallies as EU's Barnier fans Brexit deal hopes

The pound rallied Tuesday after the European Union's top Brexit negotiator flagged the possibility of a divorce deal this week, reviving hopes Britain could avoid crashing out of the bloc.

With the exit deadline on October 31, Michel Barnier's comments reinforced hopes for an eventual agreement between the two sides and came after reports said a compromise was taking shape.

Ahead of a meeting to update EU countries on negotiations, he told reporters: "This work has been intense all along the weekend and yesterday because even if the agreement will be difficult -- more and more difficult to be frank -- it's still possible this week."
He added in a note: "While it is by no means certain that the UK and Europe can agree to a deal or that such a deal can make it through the UK parliament, there does appear to be recognition from the British side that any Brexit deal will have to treat Northern Ireland very differently from the rest of the UK."
"The rhetoric-high, but detail-light trade announcement in Washington DC on Friday has been tempered by China being both a lot more circumspect and requesting additional talks before signing an agreement."
"There are still some issues that need to be worked out in wording but I would say we have every expectation that phase one will close."
Pound/dollar: UP at $1.2667 from $1.2555 at 2040 GMT Euro/pound: DOWN at 87.05 pence from 87.79 pence Euro/dollar: UP at $1.1024 from $1.1024