European Union officials hoped to sketch out a Brexit deal with Britain within hours, but negotiations stretched into early Wednesday in the latest effort at producing an agreement in more than three years of false starts and sudden reversals.

The bloc said it might be possible to strike a divorce deal by Thursday's EU leaders' summit, which comes just two weeks before the UK's scheduled departure date of October 31. One major proviso: The British government must make more compromises to seal an agreement in the coming hours.

Britain and the EU have been here before – within sight of a deal only to see it dashed – but a surge in the British pound on Tuesday indicated hope that this time could be different. The currency rose against the dollar to its highest level in months.

Even though many questions remain, diplomats made it clear that both sides were within touching distance of a deal for the first time since a UK withdrawal plan fell apart in the British House of Commons in March.

Still, talks that first lingered into Tuesday night turned into negotiating past midnight as no deal materialized between experts from both sides holed up at EU headquarters in a darkened Brussels.

Late Tuesday, Martin Schirdewan, a German member of the European Parliament's Brexit Steering Group, said an agreement was "now within our grasp" following a breakthrough in negotiations.

This week's EU leaders' meeting – the last scheduled summit before the Brexit deadline – was long considered the last opportunity to approve a divorce agreement. British Prime Minister Boris Johnson insists his country will leave at the end of the month with or without an agreement, although U.K. lawmakers are determined to push for another delay rather than risk a chaotic no-deal Brexit.

Michel Barnier, EU's chief Brexit negotiator, said at a meeting of the bloc's ministers in Luxembourg on Tuesday that the main challenge now is to turn the new British proposals on the complex Irish border issue into something legally binding. EU member Ireland has a land border with the UK's Northern Ireland, and both want to keep goods and people flowing freely across the currently invisible frontier.

Brexit deal 'still possible' this week, said Barnier

A friction-less border underpins both the local economy and the 1998 peace accord that ended decades of Catholic-Protestant violence in Northern Ireland. But once Britain exits, that border will turn into an external EU frontier that the bloc wants to keep secure.

Barnier wants a clear answer by Wednesday morning, so EU capitals can prepare for the bloc's two-day summit that begins Thursday. "It is still possible this week," said Barnier. As so often, intricate details kept hopes from turning into immediate reality.

The big question is how far Johnson's government is prepared to budge on its insistence that the UK, including Northern Ireland, must leave the European Union's customs union – something that would require checks on goods passing between the UK and the EU, including on the island of Ireland.