The British pound swiftly erased a session's worth of losses Tuesday evening local time following reports that the EU is ready to work with UK PM Boris Johnson to include a time limit on the controversial Irish Backstop.

Remember: The Irish backstop is a provision in the withdrawal agreement that would purportedly impose a hard border between Northern Ireland and the rest of the UK if the two sides can't come up with a permanent trade deal during the post-Brexit negotiating period. The provision is a 'backstop' - meaning it only comes into effect if no binding agreement is reached.

But according to Bloomberg, the EU is reportedly on the verge of making a major concession to Johnson: Possibly agreeing to time-limit the backstop, which would help assuage British concerns that the backstop could leave them 'trapped' in the EU customs regime without any say over policy. Johnson himself has compared this status to being a "vassal state".

If the report is accurate, this would be the most serious sign yet that the EU might be willing to fold to Johnson and grant him the concessions he needs to pass an updated version of Theresa May's withdrawal agreement.

Per BBG, any time limit granted by the EU could be linked to giving the Northern Ireland Assembly a vote in whether the province remains in the backstop, which is designed to prevent a hard Irish border, the people said.

The news sent the pound surging.

Still, with Parliament in turmoil, it's unclear whether Johnson would even be able to sell a modified Irish backstop. The deal would also need to be accepted by the Irish government.

But for months now, we've been pointing out that the EU doesn't have the legal authority to force the UK and Ireland to build physical barriers - meaning that the bloc's refusal to budge on the withdrawal agreement is merely a bluff.