(Sharecast News) - Sterling popped higher on Tuesday after the EU's top Brexit negotiator, Michel Barnier, said a Brexit deal is possible.
At 0900 BST, the pound was up 0.4% against the dollar at 1.2663 and 0.5% higher versus the euro at 1.1488.
Speaking ahead of a meeting of EU ministers in Luxembourg, Barnier said: "Our team are working hard. This work has been intense all over the weekend and yesterday.
"Because, even if an agreement will be difficult - more and more difficult, to be frank - it is still possible this week."
He added: "Reaching an agreement is still possible. Obviously any agreement must work for everyone - the whole of the UK and the whole of the EU. It is high time to turn good intentions into a legal text."
Spreadex analyst Connor Campbell said: "While Michel Barnier was keen to stress it has become 'more difficult' to reach an agreement this week, stating that it is 'time to turn good intentions into legal texts', his claim that it is 'still possible' for the UK and EU to come together on a deal was enough to restore the pound's faith in proceedings, even if other members of the bloc were less convinced."
Neil Wilson, chief market analyst at Markets.com, said: "At the same time wire reports suggest the UK will table fresh proposals to break the deadlock. So a text could be agreed this week, but if not there is another week in which negotiators can make their last-ditch attempt to get an agreement."
Wilson said sterling is looking quite volatile and susceptible to Brexit chatter.
"If 1.27 is breached we can look to the June peak at 1.2780 first before a potential stab at the big 38.2% Fibonacci retracement of the top-to-bottom move off the post-Brexit highs at 1.28870," he said.