Pound Falls as EU Chief Says Brexit Progress Is Not Sufficient

Updated on
  • More realistic tone, yet concessions not enough: EU’s Tusk
  • Comments mean shift toward harder Brexit, says Mizuho’s Jones

The pound fell as the dollar strengthened and the European Union appeared to crush Britain’s hopes of starting trade negotiations with the bloc as soon as next month.

Sterling erased early gains to fall to the lowest in nearly two weeks, after EU President Donald Tusk said on Tuesday he didn’t see enough concessions from Britain to progress to discussions of future trade. That followed a meeting in London with U.K. Prime Minister Theresa May, while negotiators in Brussels continued talks over the U.K.’s divorce bill.

“The pound traded lower on the Tusk comments as the pendulum swung a bit further away from a soft landing,” said Neil Jones, head of hedge fund sales at Mizuho Bank Ltd. “As long as the EU holds this line, then the chances of maintaining single market access in return for paying any Brexit bill are reduced to crumbs.”

The pound fell 0.4 percent against the dollar to $1.3417 by 4:45 p.m. in London, after rising as much as 0.4 percent earlier. Sterling trimmed gains against the euro to 0.3 percent, with the common currency fetching 87.73 pence, amid euro weakness stemming from the German election outcome.

The U.K. currency had climbed earlier against the dollar on hopes for progress in this week’s Brexit talks. Although Tusk said May’s tone was “more realistic”, he added that “there is no sufficient progress yet,” referring to the EU’s requirement for beginning discussions on a future relationship.

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