The pound sold off sharply against the euro and the dollar on Wednesday, amid reports that UK and EU negotiators still remained at loggerheads in Brexit trade talks.
Michel Barnier, the EU’s chief Brexit negotiator, gave an update to the bloc’s member states on Wednesday morning. Barnier said differences remained on three key issues, according to Bloomberg — fisheries, a level playing field, and how the deal is enforced.
“A deal still hangs in the balance,” a senior diplomatic source told Reuters.
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Sterling dropped sharply when headlines around Barnier’s briefing crossed the wires. The pound was down 0.3% against the euro to €1.1083 (GBPEUR=X) shortly after the news broke. Sterling was down 0.4% against the dollar to $1.3364 (GBPUSD=X). The pound had been positive against both pairings earlier in the session.
Negotiators have been stuck at a stalemate in talks for months but hopes of a breakthrough had been rising in recent days. Tom Newton-Dunn, Times Radio’s chief political commentator, sent the pound spiking on Tuesday after tweeting that the UK and EU had entered the so-called “tunnel” — a super secret final phase of negotiations where the definitive text of any agreement is approved.
“It appears the four day tunnel has failed,” Newton-Dunn tweeted on Wednesday morning.
“Brexit talks drag on,” said Neil Wilson, chief market analyst at Markets.com. “Still, expect a deal in the coming days – GBP crosses will be increasingly sensitive.”
On Wednesday the UK’s public accounts committee warned Britain was facing a “catastrophe” at the border, accusing the government of a lack of preparedness for Brexit.
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