Pound Sterling had jumped to $1.2265 against the US dollar after spiking as much as $1.2292. The currency had also rocketed against the euro, soaring from €1.1134 to to €1,1177 in the space of 24 hours. EU capitals are considering a unilateral exit clause from the troublesome Northern Ireland backstop after a certain number of years. The plans would see the Northern Ireland Assembly handed a vote on whether to continue with or revoke the measure, provided both communities in the province agree to it.
By allowing Northern Ireland to take the decision on whether they want to stay in the EU or not, the market has taken this news positively as it will be a major step towards a breakthrough in the Brexit deadlock
This could essentially set a five-year time-limit to the backstop, which would be seen as a huge victory for Boris Johnson.
The EU would require both nationalist and unionist communities to consent to an end to the mechanism and therefore, the bloc could cite their commitment to the Good Friday Agreement in order to make the offer.
Lee Hardman, a currency strategist at financial services group MUFG, said: “By allowing Northern Ireland to take the decision on whether they want to stay in the EU or not, the market has taken this news positively as it will be a major step towards a breakthrough in the Brexit deadlock.
But the surge in the pound only lasted a matter of minutes as the currency began to plunge sharply against both the euro and US dollar.
Pound to euro: Sterling has fluctuated wildly following another morning of Brexit chaos
Pound to euro: Sterling initially soared before quickly plummeting
Sterling quickly fell from €1.1177 to as low as €1.1144 within just 40 minutes, before dropping further to €1.1135 at 10.45am.
The currency experienced a similar slump against the US dollar, falling from $1.2281 to $1.2242 within the same 40 minute period, before plunging further to $1.2226.
But the DUP spokesman Sammy Wilson said: “The double majority arrangement is designed to ensure we can never get out of the customs union, given all the other parties are supportive of staying in the EU.”
He added: “It will go nowhere. The Government in Westminster will not accept it, we will not accept it.
Pound to euro: Sterling also suffered a sharp fall against the US dollar
“I don’t think anyone who looks at it with any kind of objectivity at all will say it’s an improved offer.”
Mr Johnson wants to remove what he has described as the “undemocratic backstop” and has proposed replacing it by suggesting a number of changes.
These are that Northern Ireland would stay under EU regulations, customs checks should be made away from the border, and that the country’s assembly, Stormont, would have the right to vote on the arrangements.
But the EU is worried handing “consent” to Northern Ireland would give the DUP – key allies to Mr Johnson – a veto.
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Pound to euro: Boris Johnson is fighting to agree a Brexit deal with the european Union
Pound to euro: Boris Johnson and Angela Merkel had an explosive phone call on Tuesday
Mr Johnson sent a revised plan for a Brexit deal to the EU last week, including new proposals for the Northern Ireland backstop.
But the ideas were quickly rejected by leading EU officials, increasing the chances of the UK leaving the bloc without an agreement in place.
Irish Prime Minister Leo Varadkar had initially welcomes the new proposals from his UK counterpart but after closer inspection, warned they “fall short in a number of aspects”.
He is due to meet Mr Johnson again on Thursday in a last-ditch attempt to thrash out a late Brexit deal.
Pound to euro: The next two weeks are cruicial for a Brexit deal
Following a phone call with the Prime Minister last night, Mr Varadkar admitted it would be “very difficult” to secure a Brexit deal by next week.
He told RTE News: “There are some fundamental objectives that haven’t changed for the past three years and we need them guaranteed,” he told RTE news.
“I think it is going to be very difficult to secure an agreement by next week, quite frankly.
Pound to euro: Leo Varadkar admitted it would be ‘very difficult’ to secure a Brexit deal by next week
“Essentially what the United Kingdom has done is repudiate the deal that we negotiated in good faith with Prime Minister Theresa May’s government over two years and sort of put half of that now back on the table and are saying ‘That’s a concession’. And of course it isn’t really.”
Mr Johnson had earlier spoken to Angela Merkel on the phone but according to a Downing Street source, the German Chancellor made clear to him a Brexit deal is “overwhelmingly unlikely”.
The Downing Street source said Mrs Merkel told Mr Johnson the only way to break the current deadlock was for Northern Ireland to remain in the customs union.