- Sterling surged against the US dollar on speculation about an impending fudge
- Claims that Britain and Germany lowering ambitions on detailed trade deal
- Latest sharp market movement on Brexit rumours as anxiety grows over no deal
The pound surged today on speculation that Britain and German are ready to fudge a Brexit deal to avoid chaos next March.
Sterling rose more than 1 per cent amid claims ambitions are being downgraded for the 'political declaration' on trade that will accompany the divorce.
That could pave the way for the two year transition period to happen - effectively easing the time pressure on thrashing details of a future relationship.
It is the latest sharp market movement on Brexit rumours as anxiety grows about the impact negotiations collapsing.
However, the idea - which has been tagged 'blind Brexit' - appears to assume that Tory Brexiteers would be willing to sign off the £39billion divorce bill without knowing what the UK will receive in return.
The pound has been struggling in recent weeks as the standoff between the EU and UK deepens.
A slew of government planning papers released over the summer demonstrated the potential complexity of dealing with a no-deal outcome.
Disputed Treasury forecasts have suggested the UK economy could miss out on 10 per cent growth over the next 15 years - and the EU will also be badly damaged.
There was a spike in the value of the pound last week after comments from Michel Barnier that the bloc was ready to offer Britain an 'unprecedented' package.
Sources close to French President Emmanuel Macron were also said to have stressed the importance of reaching agreement. However, the optimism ebbed away after Mr Barnier made clear he is still implacably opposed to Mrs May's Chequers blueprint for a soft Brexit.
Tory Eurosceptics and Remainers have also roundly condemned the proposals - which would see the UK follow rules on goods and collect some taxes for the bloc.
According to Bloomberg today, both Britain and Berlin are now ready to accept a less detailed agreement on Britain's future trade ties with the EU.
Sterling rose above 1.29 against the US dollar on the report, while against the euro it went up 0.5 per cent to 1.11.
Neil Wilson, chief market analyst at Markets.com, said: 'The reports indicate that both sides are prepared to forego ironing out some details on the future relationship now, in order to get a deal done.
'A couple of health warnings on this: first, Germany does not – despite its clear dominance of the bloc economically – actually speak for the EU position. Michel Barnier may well have something to say about this report. As might Theresa May.
'Second, we've heard these kinds of rumours lift the pound before and it should be treated with caution. There is a strong chance that this rally could run out of steam and retrace in fairly short order.'
The pound has taken a severe hammering in recent weeks following comments from a number of MPs and key figures.