Above: DUP leader Arlene Foster. Image © DUP, Reproduced Under CC Licensing

- DUP offer hope for May's Brexit deal

- Europe looking increasingly split on issue of Irish backstop

- Sterling hits 9-month highs against the Euro,

Pound Sterling's 2019 advance accelerated ahead of the weekend on news Northern Ireland's DUP have softened their resistance to Prime Minister Theresa May's Brexit deal.

The news helps ensure the extraordinary recovery in the value of the UK currency continues with the Pound-to-Euro exchange rate hitting 1.16, its highest levels since April 2018. The Pound-to-Dollar exchange rate has leapt over the 1.31 barrier and now quotes at 1.3120.

According to The Sun, Northern Ireland's DUP appear to have softened their stance on the Northern Ireland backstop, making the passing of Prime Minister Theresa May's Brexit deal more likely to pass.

The ratification of the deal would amount to a notable positive for Sterling as it suggests the months of uncertainty surrounding Brexit might be about to come to an end.

"GBP outperformed overnight, as it held gains registered on the back of a report by the Sun," says a currency briefing from EUREX.

Above: Sterling hits highest levels since April 2018 against the Euro.

The Sun report "the DUP have privately decided to back Theresa May's Brexit deal next week when she toughens it up, in a major breakthrough for No10," adding that "the DUP are now willing to accept a backstop as long as it's specifically time limited".

The problem is EU chief Brexit negotiator Barnier has consistently rejected the idea of the backstop being time limited. However, this week we have also seen an extraordinary breakdown in the united front Europe has been putting on show over the issue of the Irish backstop.

Poland have suggested the backstop should be limited to five years, while Barnier himself said that in the event of a 'no deal' Brexit the EU would assist in facilitating technical solutions to ensure a hard border does not emerge.

This is the very same solution advocated by UK Brexiteers and punches a hole in the European argument that the backstop is the only game in town.

Prime Minister May now has an opening in which to make an attack, combine this with the DUP concession and markets fancy she has a shot at success. Europe surely know they must now give ground, "unless a deal is passed soon, the EU will have on its doorstep the Continent’s second-largest economy and its biggest trading partner fighting itself for years in an ever more messier populist culture war, growing steadily more resentful, while bordering an EU member state, Ireland," notes political commentator Iain Martin, writing in the Times.

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Theresa May will likely head back to Brussels next week with the proposals she believes will have a shot at breaking the Brexit deadlock, they will in all likelihood centre on the Irish border question.

Getting a time limit on the backstop appears to be May's key objective as this will secure the backing of Northern Ireland's DUP who are a critical component in the Brexit story as they hold the balance of power in the UK parliament: the government relies on their 10 MPs to pass legislation.

Tom Newton Dunn, Political Editor at The Sun, sheds further light on why the DUP might be shifting:

"Senior DUP figures say they now fear pro-Remain Tory MPs will side with Labour to deliver a significantly softer Brexit if the PM’s deal is voted down on Tuesday. The party’s 10 MPs are also under spiralling pressure from grass roots members and their Stormont politicians to agree to a deal to hold off growing Republican calls for a reunification referendum under a no deal Brexit."

We feel that were the DUP to back May's deal a significant number of Conservative party opponents would follow them, and as numbers diminish so the pressure on the rebels grow.

With remain-leaning MPs reportedly finding a way to delay Brexit - or even suspend Brexit - Brexiteers are concerned that their opposition could mean Brexit is lost altogether; May's Brexit is better than no Brexit at all.

The Pound has rallied through the course of 2019 as moves in the UK parliament have mean the prospect of a 'no deal' Brexit has diminished.

Insurance against such an outcome has been provided by the tabling of amendments in parliament that would grant MPs the ability to demand the government seeks an extension on the Article 50 process, thereby effectively delaying Brexit beyond March 29. We heard yesterday that the EU could be open to extending the date by three months.

The Cooper‑Boles and Grieve amendments are the two with the best chance of being accepted by MPs next week. The Cooper‑Boles amendment will legislate to prevent a ‘no‑deal’ Brexit from occurring, and also force an extension of Article 50 if the government cannot secure a deal in the Commons by end-February.

Following such an outcome, the Grieve amendment will then circumvent government influence in parliament for 6 days. During these 6 days, Brexit debate will be prioritised, no filibustering will be possible, and a parliamentary vote will be taken at the end.

"While investors should not take the success of these amendments for granted, we note 58 MP’s have already signed‑on for the Cooper‑Boles amendment. Moreover, Labour appears to have finally shown (some) of its hand saying it would whip its members to support the Cooper‑Boles bill to prevent a ‘no‑deal’ Brexit from occurring," says Richard Grace an FX strategist with CBA.

Time to move your money? Get 3-5% more currency than your bank would offer by using the services of foreign exchange specialists at RationalFX. A specialist broker can deliver you an exchange rate closer to the real market rate, thereby saving you substantial quantities of currency. Find out more here.

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