Comments of Britain and the European Union having a 50/50 chance of reaching a Brexit deal failed to impress the pound on Friday.
Sterling was lower against both the dollar and the euro as EU internal market commissioner Thierry Breton spoke to France 2 television, saying there was an equal chance of reaching a deal and the UK leaving without one.
“We are extremely clear on the conditions and the access to our European market,” he said, adding that Britain had more to lose than the EU if talks deteriorated and resulted in a “no-deal” Brexit.
The UK left the EU in January this year, however, negotiating a potential trade deal is still ongoing. It is set to leave the EU transition period on 1 January 2021.
Negotiators are locked in talks with the aim to secure a breakthrough by 19 November.
On Thursday, the European Union’s chief Brexit negotiator Michel Barnier told the bloc’s diplomats that the UK had “blocked” progress in key areas of trade deal talks, according to reports.
Barnier briefed representatives from the EU’s 27 member states at a confidential meeting, Sky News said, saying that “fundamental differences” remain between London and Brussels.
He said the most vital hurdle was the “level playing field”, which would ensure the UK follows the same rules as the EU on issues such as labour law and state aid.
Barnier told diplomats that the level playing field is “the most fundamental point where we still have major differences”, according to Sky.
He added: "The prime minister has stressed that alignment [with European rules] would breach sovereignty.
"This question seriously throws the chances of an agreement into doubt."
Investment bank Rabobank said that the outlook for the pound will remain clouded into 2021 even in the event of a trade deal being reached this year.
Jane Foley, head of FX strategy for Rabobank in London, said: "Since its peak in mid-September EUR/GBP has been trending lower. Optimism that the EU and the UK will sign a trade deal in November is providing the pound with some support.”
"While many Brexit-weary investors will be looking forward to an end to the UK political wrangling next year, these hopes may prove premature.”
Watch: What happens if no Brexit trade deal is struck?