The pound saw its biggest drop in almost a year following Theresa May’s crunch statement, in which she admitted Brexit talks had reached an impasse.
At around 2pm on Friday, the pound dropped to 1.3% against the US dollar as the Prime Minister began speaking at 10 Downing Street – its biggest fall since November.
The sterling is now at $1.31 and €1.11.
Craig Erlam, senior market analyst at foreign exchange firm Oanda, said: “The pound came under pressure in the lead up to May’s speech and that continued during and in the aftermath, with traders potentially seeing this as a sign that no deal is a real and increasingly likely outcome.
“That may be exactly the message May wanted to send to the media, her party – particularly the Brexiteers – and the EU but I do not believe it changes anything.”
He added that the speech was a “stern rehash” of past statements.
“As ever, these talks are showing themselves to be a frustrating and soul destroying game of chicken among a group of officials that agree that no deal is a bad outcome but are determined to drag them out in the hope of slightly better terms.”
The speech saw May call for the European Union to treat the UK with respect and followed an unsuccessful few days in Salzburg, where EU Council President Donald Tusk ripped apart her Chequers plan, saying it “will not work”.
“The EU should be clear, I will not overturn the result of the referendum, nor will I break up my country. We need serious engagement in resolving the two big issues in the negotiations and we stand ready,” the PM said.
“I have treated the EU with nothing but respect. The UK expects the same.”
Tusk said yesterday unless May came forward with new proposals in October then there could be no final deal signed in November.
The UK is due to exit the EU in just six months time - on March 29, 2019.
Jeremy Corbyn said May’s negotiating strategy had been a “disaster”.
“The political games from both the EU and our Government need to end because no deal is not an option,” the Labour leader said.
Responding to May’s speech, Jacob Rees-Mogg, the leader of the backbench Tory Brexiteers, said: “The PM has shown steely resolve at the eleventh hour and is standing up to EU bullies.”