(Bloomberg) — Sign up to our Brexit Bulletin, follow us @Brexit and subscribe to our podcast.The U.K. and the European Union took a step closer to agreeing the terms of Brexit after a positive meeting between the British and Irish leaders identified a “pathway” to a potential deal. The pound jumped by the most in seven months.U.K. Prime Minister Boris Johnson hosted Irish premier Leo Varadkar for two and a half hours of private talks at a country house in northwestern England before taking a walk around the grounds together. Varadkar said he believed a deal is possible before the end of the month, and urged negotiators to resume talks in Brussels.After the meeting, the two leaders issued a joint statement saying they had identified the potential for a route to an agreement during the course of a “detailed and constructive discussion.”Both leaders “continue to believe that a deal is in everybody’s interest,” they said in the statement. “They agreed that they could see a pathway to a possible deal.”The pound hit a session high after the statement was released, gaining 1.6% to $1.2400. With just three weeks left until the U.K. is due to leave the EU, negotiations have stalled in Brussels and the time for striking an orderly separation agreement is almost up. The positive tone from the two leaders on Thursday indicated that a breakthrough is still possible.“I had a very good meeting today with the prime minister and our teams together — very positive, very promising,” Varadkar told reporters after the talks. “I do see a pathway towards an agreement in the coming weeks.” He said that, while obstacles remain, he hopes the progress on Thursday will be enough for formal negotiations to re-start in Brussels.The U.K. prime minister says he’s determined to force Britain out of the EU on the existing deadline of Oct. 31 — even if that means leaving with no agreement to cushion the impact on the economy. EU leaders, meanwhile, are preparing to give Britain an extension to the deadline, even though that’s something Johnson says he will never accept.The atmosphere surrounding the negotiations had turned sour in recent days as the two sides blamed each other for their failure to make progress.The joint statement from Johnson and Varadkar marked a positive shift in tone. But it also highlighted the difficulties the negotiators have faced, notably on agreeing arrangements for checks on goods crossing the Irish border and how the region’s community could give its consent to these plans.“They agreed to reflect further on their discussions and that officials would continue to engage intensively on them,” the joint statement said. Following the discussions, Varadkar will consult with the EU’s Brexit negotiating taskforce. U.K. Brexit Secretary Stephen Barclay will meet the EU chief negotiator Michel Barnier on Friday morning.The key disagreement between the U.K. and the EU is over how to ensure there are no customs checkpoints at Ireland’s land border with the U.K.Johnson has proposed limited customs inspections away from the frontier, but Varadkar insists any such checks will threaten peace in the region, which suffered decades of terrorism.The Irish Times reported there was “very significant movement” from Johnson on the customs issue in Thursday’s talks. There was no further detail or information on concessions from the EU side, the newspaper’s political editor Pat Leahy said on Twitter, without saying where he got the information.Any move to take Northern Ireland out of the U.K.’s custom zone is likely to be strongly resisted by the Democratic Unionist Party, which has 10 votes in the House of Commons that could be crucial to Johnson getting any deal accepted by Parliament.The EU has also criticized the U.K.’s plan to give the Northern Ireland Assembly a veto over the deal. Johnson’s team say it’s vital to allow the region’s community to give “consent” for the future arrangements on the border.But for the EU, allowing a veto for Northern Irish politicians would undermine the point of a long-term guarantee against a hard border going up at the frontier.Ireland’s position will guide the EU’s remaining 27 member states. If Johnson can convince Varadkar to move, there is a chance a deal could be outlined ahead of the crucial summit of EU leaders Oct. 17-18.(Updates pound move in first, fifth paragraphs.)–With assistance from Dara Doyle.To contact the reporters on this story: Tim Ross in London at firstname.lastname@example.org;Robert Hutton in London at email@example.comTo contact the editors responsible for this story: Flavia Krause-Jackson at firstname.lastname@example.org, Thomas Penny, Kitty DonaldsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.