Pound Rallies On Report Johnson And Varadkar Nearing Brexit Deal

So much for that ultimatum.

In an effort to win a deal with the EU27 that might have a chance of making it through the House of Commons (where Theresa May's hated withdrawal agreement was defeated three times), Prime Minister Boris Johnson's negotiators have proposed what Sky News described as a "pared-down free trade agreement" to hopefully end the Brexit stalemate by striking a mutually amenable deal that could be passed by the Oct. 31 'Brexit Day' deadline.

Johnson has insisted that the UK will leave the EU by the Oct. 31 deadline, though MPs have already passed a law requiring the PM to request an extension if there's no deal by Oct. 19 (following a weekend summit that's widely seen as the last chance for both sides to strike a deal). The PM and his Irish counterpart met at Thornton Manor on the Wirral, Merseyside in Ireland on Thursday for what their offices described as a "private meeting" ahead of next week's European Council meeting (the above-mentioned summit).

Though the latest British proposal isn't "fully formed", the free-trade agreement pitched by Johnson was described to Sky as a "pared down free trade agreement" that might form the foundation of a plan that could end the Brexit stalemate.

Johnson's team is optimistic about the plan, and believes that the support of Irish PM Leo Varadkar might help convince the rest of the EU27 to come along. Several EU nations have already pledged to support an agreement if Varadkar, whose country will be most heavily impacted by Brexit, gives it his seal of approval.

Traders were convinced, and the news sent GBP soaring all the way to $1.2460, erasing all of its losses for the month of October, and then some.

Per Sky, UK negotiators have become extremely frustrated with Michel Barnier, the lead EU negotiator, claiming that his opposition to British proposals, along with his overall refusal to give any ground in the negotiations, doesn't make sense. Johnson's latest proposal supposedly satisfies several of the requirements that Barnier laid out in a speech last October. However, when Johnson released his plan, Barnier swiftly lambasted it as unworkable.

So they have shifted their focus to winning the support of Varadkar, whom the British believe can convince the rest of his EU27 compatriots to come along.

However, one senior Brexit reporter, ITV's Robert Peston, warned that Johnson's optimism might be a "ruse" to lessen the pressure from Tory backbenchers and give Johnson more room to maneuver.

A Free-trade agreement would remove tariffs on goods produced by both sides, but it wouldn't entirely eliminate the need for customs checks.

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