Following sanguine UK government borrowing figures on Thursday morning, Sterling popped during the afternoon in response to rumours Britain was prepared to pay €20 billion for access to the EU single market for two years after Brexit.

The latest public finance figures showed that Britain borrowed £5.7 billion in August to balance the books; the lowest August figure since the financial crisis struck a decade ago and better than market expectations of £6.4 billion. The August report benefitted from sturdy tax receipts, while July’s surplus was revised up from £0.8 billion to £1.3 billion.

Demand for the Pound solidified during the evening when the BBC reported that UK Prime Minister Theresa May was planning to make an ‘open and generous’ offer of around €20 billion to the EU today in exchange for Britain maintaining access to the EU’s single market and customs union during the proposed two-year transition period. The rumour boosted Sterling because the offer was seen to provide businesses with continuity and potentially speed up the Brexit negotiation process.

Pound to Euro Exchange Rate Bolstered by Hopes of €20bn 2-Year Brexit Transition Deal

The Pound to Euro exchange rate shrugged off mild morning gains Thursday evening as markets responded positively to rumours of Theresa May’s Brexit offer. If the UK Prime Minister’s speech in Florence hits the mark in terms of moving along the Brexit process and giving businesses the confidence to resume investments in Britain then we could see further gains for Sterling versus the single currency. However, an unconvincing speech could prompt GBP/EUR to give up some of its recent gains. Indeed, the Pound has rallied by around six cents over the last three weeks.

European Central Bank (ECB) President Mario Draghi gave a speech Thursay, but the focus was on the role of government in addressing financial balances rather than future monetary policy. Currency traders largely shrugged off the statement as unimportant. A 16-year high Eurozone consumer confidence report also failed to ignite demand for the Euro.