Pound jumps on rumours there is a deal in the brexit backstop

[bear.getting.old]

https://www.poundsterlinglive.com/gbp-live-today/10893-gbp-to-eur-and-usd-malthouse-plan-dumped

Fresh rumours pointing to progress on Brexit negotiations appear to be triggering a strong rally in the British Pound on Tuesday, February 19.

It appears markets have picked on a series of reports that suggest the Prime Minister is shifting stance on the Irish backstop in order to get something both the EU and a majority in Parliament can accept.

Harry Cole, Deputy Political Editor of the Mail on Sunday is notable in feeding news through to the marketing, saying "it sounds like the Malthouse Compromise is dead. The Prime Minister made clear it wasn’t a goer to Cabinet and Hammond backed her up to say it would be inconceivable without an extension to A50. High Noon just got a little more tense."

The Malthouse Compromise being referred to here was a plan that saw the two opposing Brexit factions in the Conservative Party come together to put forward a new plan that would involve a redrafting of the contentious Irish backstop and an extension of the transition period until 2021. Crucially this plan would unite both 'remainers' and 'brexiteers' in the party and could therefore have a chance of passing through parliament.

The Malthouse Plan in itself was suggestive that a deal could be done, but the problem it faced was that it was never really going to be accepted by the EU. Therefore, it was seen as fanciful thinking.

The importance of this afternoon's headlines lies rather with a view that a new backstop deal is in the offing.

The news is "suggestive that a new backstop deal with the EU is now imminent. PM was always going to dump Malthouse, but wanted to wait until the last minute in a bid to limit the ERG eruption," says Tom Newton Dunn, The Sun's Political Editor and a well respected source on Brexit developments.

Markets clearly think something is afoot:

The Pound-to-Euro exchange rate has rallied a notable 0.70% to reach 1.1503 on the day; the day's low is located at 1.1408.

The Pound-to-Dollar exchange rate is nearly a percent higher at 1.3044, with the day's low down at 1.2895.

Cole adds he senses the "faintest wisp of white smoke," as he is told by his sources "Downing Street and UK negotiators were “pleasantly surprised” at how well talks went yesterday and there is rapid movement behind scenes."

The talks being referred to are those held between EU negotiators and Brexit Secretary Stephen Barclay and Attorney General Geoffrey Cox.

Indeed, Cox was due to give a speech around mid-day today covering the legalities on any changes to the Brexit backstop deal, but it appears this has been delayed.

This again suggests that movement on Brexit is afoot, and if we look at the nature of Sterling's advance we can suggest it starts when markets got wind that the Attorney General was 'missing in action'.

It appears a series of small newswire reports have culminated in feeding a story that Brexit progress is being made which has yielded a steady rally in the value of the British Pound.