Pound down vs euro and dollar as Michel Barnier warns EU trade deal is 'unlikely'

The pound has tumbled against the dollar and the euro after UK and EU negotiators said they have not yet reached any agreement in a post-Brexit trade deal.

The EU’s chief negotiator Michel Barnier said a trade agreement "at this point" is "unlikely". Britain’s negotiating head David Frost said there are "considerable gaps remain in the most difficult areas" following the latest round of talks in London, which concluded today.

Frost said: "It is unfortunately clear that we will not reach in July the 'early understanding on the principles underlying any agreement' that was set as an aim at the high-level meeting on June 15."

Traders took the comments as a sell signal, and sterling fell nearly half a cent against the dollar to $1.2692 and 0.24 euro cents to €1.0980 on the day. The currency has struggled this week on signs the trade talks are at an impasse.

Sterling’s movement was notable on a quiet day in markets, with the FTSE 100 up aided by positive corporate updates from consumer goods giant Unilever and software specialist Sage. Connor Campbell, financial analyst at Spreadex, said: “Europe continued a fairly bland, if positive, session on Thursday, with the Dow Jones all set to echo the continent’s mild gains.

“Ignoring the potential for a fresh US-China bust-up, the markets were fairly aimless in their growth. With the pound’s sinking even further against the dollar and euro, falling 0.4% apiece – against the single currency it is heading for its worst close in July – the FTSE was able to juice its gains, climbing 0.6%.”

He added: “Sterling’s issues appear to stem from both the lack of progress in the UK-EU Brexit talks, and the rapidly shrinking window to secure a deal, and a record decline in factory output between May and July.”

Frost did offer some crumbs of comfort though. He said: "We have also had constructive discussions on trade in goods and services, and in some of the sectoral agreements, notably on transport, social security cooperation, and participation in EU programmes. We have also continued to deepen our understanding of each other's constraints on law enforcement.

"But considerable gaps remain in the most difficult areas, that is, the so-called level playing field and on fisheries.”

Barnier said the UK's position on fisheries is "simply unacceptable".

Talks are expected to continue next week with a further round next month.