The pound rallied as comments by the European Union’s chief negotiator rekindled hopes that a compromise may be found over the Irish border, which has been a major hurdle in breaking the Brexit deadlock.

Sterling advanced for a second day after Michel Barnier said he was open to an alternative plan for the border, though he cautioned there would be no easy solutions. The currency extended its gains after retail sales in the U.K. for June came in better than forecast.

“It should send the pound higher if there is a change of tone from the European Union, and these comments do suggest potential for raised flexibility,” said Neil Jones, head of hedge fund currency sales at Mizuho Bank Ltd. “Barnier has generated some upside momentum.”

Sterling gained 0.3 per cent to US$1.2472, after touching US$1.2382 Wednesday, the lowest since April 2017. The currency rose 0.5 per cent to 89.85 pence per euro, its second day of gains.

Barnier said discussions on the border would need time, in an interview for a BBC documentary to be broadcast Thursday. The EU has repeatedly ruled out changing or removing the so-called backstop agreement to prevent a hard border on Ireland. While officials are discussing offering new language on the use of technology to solve the issue, that wouldn’t remove the need for the backstop.

The pound fell to a 27-month low earlier this week after both contenders to be U.K. prime minister, Boris Johnson and Jeremy Hunt, said the backstop needed to go. Hunt said Thursday that the backstop would never get through Parliament and warned that a gung-ho approach could trigger an election.

The tougher rhetoric has also boosted volatility, with measures of expected pound swings over the next three and six months, covering the run-up to and the aftermath of the Oct. 31 Brexit deadline, surging this week to the highest among Group-of-10 currencies.

Traders are now awaiting a vote in Parliament later Thursday that will see lawmakers once again seek to block the next U.K. leader from going for a no-deal Brexit. The House of Lords backed an amendment on this late Wednesday, which “put some stability back into the pound,” said Jones.