Sterling falls as UK heads for Brexit talks

The sterling was weaker against all major currencies this morning ahead of a key summit meeting to discuss Brexit.

The pound fell against the dollar, the euro and the yen as Prime Minister Theresa May prepared to address fellow European Union leaders in the Austrian city of Salzburg.

London’s blue-chip FTSE 100 Index was also lower, in contrast with exchanges on the continent.

London shares down, continental stocks rally

The sterling lost 0.15% against the euro at €1.1247 and a similar 0.14% against the dollar at $1.3139. Against the yen, it dropped 0.06% to 147.1050 yen.

Prime Minister May is hoping to rally support for her version of Brexit, but a huge amount of uncertainty remains as to what will happen between now and 29 March next year, when Britain is due to end what will have been 46 years in the EU and its predecessor, the European Community.

Heads of the remaining 27 EU governments will discuss her remarks among themselves on Thursday.

Stock markets were higher also in Amsterdam and Madrid.

The Prime Minister will address fellow leaders over dinner, pressing the case for her so-called Chequers plan for relations between the UK and EU after Brexit. Britain would use a common rulebook for goods, including agricultural products, but would diverge from EU regulations in relation to services.

Free movement of people would end, but Britain would commit to “continued harmonisation” with EU rules to prevent a “hard border” between Ireland and Northern Ireland. However Parliament would be free to take the UK away from EU standards if it were willing to face any consequences.

The Chequers plan has been controversial both inside Prime Minsiter May’s ruling Conservative Party and in parts of the country. But she has insisted that the only alternative is to leave the EU without any kind of agreement, which could involve serious economic damage.

No deal would be a “catastrophe”

Donald Tusk, president of the European Council, which represents member-governments, said that a no-deal Brexit would be a "catastrophe" and said all EU nations have a shared interest in limiting the damage from the UK’s withdrawal.

Uncertainty as to the outcome of the talks has led to increased hedging activity in currency markets. The pound has been sent on a roller coaster ride against the dollar since the 23 June referendum – from about $1.46 in the run-up to the poll to about $1.22 in the immediate aftermath, recovering to about $1.43 earlier this year before sliding toward $1.28 in mid-August.

Nor is there any guarantee that future movements will be kept within these bounds.

Austria currently holds the rotating six-monthly EU presidency, hence it will serve as the venue for the meeting.