The British pound made a sharp move higher against both the dollar and the euro Wednesday, before giving up gains after a newspaper report suggesting the EU could make a major Brexit concession was quickly dismissed by unionist lawmakers.
According to The Times, sources close to the talks believe that the EU was prepared to grant lawmakers from all sides in Northern Ireland the right to leave any backstop arrangement within a few years.
The backstop is an arrangement whereby Northern Ireland remains in the customs union — a common tariff area — until a solution can be found to prevent any return of physical checks on the U.K.'s border with the Republic of Ireland.
The Times story claims that lawmakers from all sides of Northern Ireland's assembly government would be granted the right to revoke the withdrawal treaty, and therefore the backstop, if a "double majority" was secured.
After the story went to print, sterling jumped 0.4% to $1.2265 versus the dollar and 0.2% to 89.54 pence against the euro. Almost all gains were given up however after the suggestion received a lukewarm response from unionist politicians in Northern Ireland who advocate Brexit.
The chief whip of the Northern Irish Democratic Unionist Party, Jeffrey Donaldson, said in a tweet that the proposal was "economic madness."
A separate report from the FT suggested that the U.K.'s ruling Conservative Party would struggle to unite around a "Brexit at any cost" platform as part of a general election campaign.
The paper claimed as many as 50 MPs would revolt against the government if it pursued no deal as an option.