The British pound fell this morning against the US Dollar and traders re-assessed the chances of a breakthrough in Brexit negotiations after the encouraging headlines seen in recent days.
European Union negotiators said on Friday an agreement with Britain was “very close” and European Commission President Jean-Claude Juncker said on Saturday a deal would be reached in November, if not this month.
That had helped push the pound up above $1.31, but investors booked profits at the start of this week, with some still cautious about whether a Brexit agreement was likely.
Analysts at Commerzbank said a deal remained a long way away, with both sides yet to agree on customs arrangements for the Irish border and Prime Minister Theresa May allegedly trying to gain support among opposition Labour party lawmakers to get a deal voted through parliament.
The pound dropped half a percent to as low as $1.3054 against the dollar, with a broader sell-off across markets and a rush into the safety of the U.S. currency also sending sterling lower.
Concerns about a row between Brussels and Rome over Italy’s proposed budget deficit targets have added to the euro’s woes in recent sessions.
Many strategists remain optimistic for Sterling should the UK make more progress towards a Brexit deal.
This Wednesday is a big day in regard to UK economic data – we will see the figures for Industrial, Manufacturing and Construction productivity as well as UK Services data and GDP.