Pound sinks as May sticks to Brexit guns

Pound sinks as May sticks to Brexit guns

Prime Minister Theresa May leaves 10 Downing Street after making a statement on the Brexit negotiations on Friday in London. (AFP Photo)
Prime Minister Theresa May leaves 10 Downing Street after making a statement on the Brexit negotiations on Friday in London. (AFP Photo)

LONDON: The pound dropped the most since November after British Prime Minister Theresa May warned on Friday that Brexit negotiations were at an impasse.

Sterling fell below US$1.31 as May said the UK and European Union were a long way apart on two big issues and reiterated that no deal was better than a bad deal.

Friday’s newspaper front pages in Britain talked of May’s “humiliation” at the Salzburg summit of EU leaders, 10 days ahead of the annual Conservative Party conference where she will face intense scrutiny.

May on Friday hit back at the EU for flatly rejecting her Brexit plans, accusing the bloc of failing to treat the UK with respect, as the stalemate in negotiations deepened.

The prime minister revived a warning that no deal is better than a bad deal, a day after EU leaders bluntly told her that her blueprint for the divorce won’t work.

In a statement in London, a day after EU leaders used their meeting to tell her that her approach won’t work, May told them it was “not acceptable to simply reject” her plan.

On Wednesday, May was left looking isolated after leaders told her to rework her plans, and set her a deadline of next month to come back with new ideas. British officials had been hoping for warmer words from European leaders at the Austrian event -- to bolster May as she prepares for her party’s conference.

“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” and “at this late stage in the negotiations it’s not acceptable to simply reject the other side’s proposals without a detailed explanation and counter proposals,” she said at her 10 Downing Street residence on Friday.

The prime minister said in March that she wouldn’t be “buffeted” by calls to walk away from talks, but as the tone of negotiations deteriorated on Thursday, she hinted that she might have changed her mind. She said the UK would continue to prepare for a no deal exit.

The pound dropped as much as 1.4% against the dollar as May spoke, the most on a closing basis since November. It was trading 1.3% lower at 1.3095 at mid-afternoon in London.

Britain is due to leave the EU in March, with or without a deal. If there’s no divorce agreement, there will be no transition -- a two-year grace period designed to prevent the country and its businesses tumbling into a legal limbo.

“May seems willing to call the EU’s bluff here, sticking to her guns,” said Valentin Marinov, head of Group-of-10 foreign-exchange research at Credit Agricole. “Trading the pound off the Brexit headlines has been plagued by fatigue in recent days, and we may see a bit of revival in the downside pound hedges.”


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