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Pound rallies as UK, Germany reportedly drop key Brexit demands

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Pound rallies as UK, Germany reportedly drop key Brexit demands

The pound jumped following a report that the U.K. and German governments have abandoned significant demands over Brexit, a move that could help facilitate talks between Britain and the European Union on a separation arrangement.

Germany would accept a less detailed agreement on the U.K.'s future economic and trade relationship with the EU to help get a Brexit deal in place, Bloomberg News reported, citing unnamed sources.

The report noted that a bare-bones agreement will enable officials to focus on the so-called backstop solution for the Irish border, a sticking point in the ongoing negotiations.

Meanwhile, Britain would also settle for a less specific statement of intent on future ties, shelving some decisions until after it leaves the EU, an official said, according to the report.

For Germany, difficult decisions could wait until Britain's Brexit transition phase is implemented, the report added.

The pound rose as much as 0.9% against the dollar following the report. It was trading at $1.2906 shortly after 12:00 p.m. ET.

U.K. Prime Minister Theresa May has told Parliament that her government continues to work toward reaching a Brexit deal with the EU in October, Reuters reported.

At the same time, German Chancellor Angela Merkel's cabinet approved a draft law on a Brexit transition phase, Reuters also reported, as Berlin continues to prepare for all possible outcomes of talks between Britain and the EU.

Merkel warned German business leaders Sept. 4 that Brexit negotiations may break down, but said that her government will help ensure that such a scenario would be avoided.

"We will use all our force and creativity to make sure a deal happens," Merkel said, according to The Guardian. "We don't want these negotiations to collapse. But we also can't fully rule that out because we still have no result."