Pound punished as fears mount over Prime Minister Theresa May's Brexit deal

CURRENCY dealers bet heavily against the pound today amid growing fears over the collapse of Theresa May’s fragile Brexit hopes and more ministerial resignations this week.

May’s unpopular deal is hanging by a thread as senior ministers balk at the European Union’s demands for a backstop on the Irish border which could leave the UK “trapped” inside a customs union. Pro-Remain transport minister Jo Johnson quit on Friday and more ministers could follow this week.

Even if May convinces the Cabinet the agreement could struggle to pass through the House of Commons. The uncertainty knocked more than a cent off the pound against the dollar.

It fell 1.11 cents to $1.2861 to the lowest point since the end of October, before reports first emerged that the PM was close to landing a deal on Brexit. Sterling also lost a quarter of a cent against the euro this morning.

Simon Harvey, market analyst at Monex Europe, said: “Sterling is possibly the best litmus test for Brexit negotiations in financial markets, and its inability to make a sustained break above the $1.30 level as negotiations approach a key juncture evidences the hard job May has.”

ING economist James Smith said: “The challenges associated with the UK-wide customs arrangement proposed as part of the Irish backstop, could see talks drag on beyond November. While nobody really knows when a deal might be agreed and approved, we still think there is a risk that it might not be until much closer to the UK’s exit date in March, that we find out whether ‘no deal’ has been truly avoided.”