Pound sterling slumps as Theresa May admits 'impasse' in Brexit negotiations

The currency fell to $1.3092 as the Prime Minister delivered a special statement in Downing Street after her Chequers Brexit plan was rejected by EU leaders in Salzburg

The pound plummeted on Friday as Theresa May admitted that the Brexit talks have reached an “impasse” and angrily criticised the EU for its “unacceptable” rejection of her own Chequers plan in Salzburg this week.

The currency dipped to $1.3092 as the Prime Minister delivered a special statement in Downing Street, down 1.3 per cent on the day.

This put sterling on course for its biggest one-day drop against the US currency so far in 2018, according to the Reuters news agency.

Against the euro the pound slipped 1.11 per cent to $1.1138.

Ms May also, once again, firmly ruled out the European Union proposal for customs checks in the Irish sea as a Brexit backstop to avoid a hard border on the island.

“We are at an impasse,” she said.

”I will not overturn the result of the referendum nor will I break up my country”.

"As the likelihood of a Brexit cliff edge notches up, so too does sterling volatility – and the Pound is closing a rollercoaster week on a downward trajectory against both the euro and the dollar,” said David Lamb of Fexco Corporate Payments.

"Either there is compromise or a no-deal but the risks of no-deal have risen," said Sarah Hewin of Standard Chartered.

"The market is still taking a view that the most likely outcome is a deal. At the moment [sterling] seems to be moving one day at a time, one hour at a time and one headline at a time but the fundamental issue is still the same."

Sharpest one-day fall of 2018?

Reuters Eikon

Ms May was speaking a day after EU leaders in Salzburg brutally rejected her plan for future trade arrangements and dealing with the Northern Irish border put together, at the cost of losing two Cabinet ministers, in her official country residence of Chequers over the summer.

Without an agreement on the Irish backstop the UK risks an economically disastrous rupture with the EU on 29 March next year.

In a sign of just how much the Salzburg rebuttal has rattled the Prime Minister, she said it was “not acceptable” for the EU to reject her plan with no alternative at such a late stage.

“Throughout this process I have treated the EU with nothing but respect. The UK expects the same, a good relationship at the end of this process depends on it,” she said.

“At this late stage in the negotiations, it is not acceptable to simply reject the other side’s proposals without a detailed explanation and counter proposals. So we now need to hear from the EU what the real issues are and what their alternative is so we can discuss them. Until we do, we cannot make progress.”

The EU has proposed a backstop agreement of customs checks in the Irish sea as a way to avoid a hard border descending between Northern Ireland and Ireland after the UK leaves the customs union and single market.

But Ms May says this would be an intolerable incursion on UK sovereignty. It would also risk collapsing her Government, since Northern Ireland’s DUP, on whose votes her government relies, also vehemently rejects the proposal.

In her statement, the Prime Minister said it would mean Northern Ireland would be “permanently separated economically from the rest of the UK by a border down the Irish Sea” and that no UK prime minister would ever agree to that

“If the EU believe I will, they are making a fundamental mistake,” she said.