(Repeats Friday's story without changes)
By Gabriela Baczynska and Alastair Macdonald
BRUSSELS, Sept 14 (Reuters) - A view among investors that a Brexit deal is more likely has pushed the pound higher this month, perplexing European Union officials and diplomats involved in the talks who say key stumbling blocks remain.
A stream of headlines on efforts to clinch an agreement at a series of summits between now and mid-November has helped sterling reverse losses suffered last month, when talk of a failure of negotiations spooked the markets.
It is up about 3.5 percent against the dollar from lows hit in August.
But one senior EU diplomat, briefed on the state of play as seen by the bloc's negotiator Michel Barnier, said: "Nothing has changed. I don't know where this optimism is coming from."
A senior EU official closely involved in negotiations said his assessment of the risk of breakdown had not changed, mainly because Prime Minister Theresa May faces major difficulties persuading her own party to back proposals that are still not satisfactory to the EU.
"You can always end up in hard Brexit by accident," he said, referring to a failure to agree on an orderly withdrawal before Britain leaves at the end of its two-year notice period on March 29.
"The biggest threat is political gridlock in the UK."
The issue of the land border on the island of Ireland remains critical and intractable.
The EU insists the withdrawal treaty contain a legal "backstop" protocol that would keep Northern Ireland in an economic space with the bloc whatever happens to British-EU trading relations after an adaptation period ends in 2020.
May, dependent on Northern Irish allies who see the EU plan as weakening their ties to the British mainland, wants to do things differently, proposing a new set of customs arrangements.
Officials say work on the withdrawal treaty tying up legal loose ends for businesses, budgets and expatriates is nearly done. But the Irish problem is tangled up with broader talks on the future trading relationship. These will only produce an outline declaration to accompany the exit deal but the two sides remain deeply divided on how it might look.
DELIVERING BREXIT
May's allies have been talking up progress. Her Brexit minister Dominic Raab, after a call with Barnier on Friday, spoke of "closing in on workable solutions".
Barnier said he and Raab discussed the latest progress.
"But substantive differences remain," he said of the Irish fix, governance of the deal and geographical indication labels for specialised local products. "We are also continuing our discussions to find common ground on the future relationship."