Pound stumbles as hopes dim of quick Brexit breakthrough

While UK Attorney General Geoffrey Cox and Brexit Secretary Steve Barclay are due to have another round of talks on Tuesday evening, the pair are not expecting to make a breakthrough, a Downing Street source told Bloomberg.

With MPs due to vote on May's withdrawal agreement on Tuesday 12 March, May could travel to Brussels by the weekend at the latest, the source suggested, in order to tie up details so that Cox could present his new legal text to MPs on Monday in order to provide a day and a half of scrutiny before the vote.

Labour’s shadow chancellor, John McDonnell, was also quoted as saying that few Labour MPs would vote for May's deal.

The pound fell 0.5% against the dollar to 1.3119 by 1338 GMT on Tuesday, and down 0.4% on the euro to 1.1573.

If May's deal is defeated again, she has said she will allow MPs to vote on whether they support a no-deal Brexit and, if not, on whether they want a short extension to Article 50.

Earlier, hopes had been buoyed by comments from Foreign Secretary Jeremy Hunt that the EU giving “reasonably positive” signals about a deal, coming after EU negotiator Michel Barnier said last week that he was ready to provide further guarantees about the backstop process.

"I don’t want to overstate them because I still think there’s a lot of work to do, but I think they do understand that we are being sincere," Hunt told BBC radio on Tuesday morning.

"I think that they are beginning to realise that we can get a majority in parliament because they are seeing the signals coming from the people who voted against the deal before who are saying, crucially, that they are prepared to be reasonable about how we get to that position that we can’t legally be trapped in the backstop."

It was revealed that Barclay had written to Barnier, asking to carve out citizens rights chapters of Withdrawal Agreement to apply even in a no-deal situation.

Last Friday Barnier said he was aware of "misgivings in Britain that the backstop could keep Britain forever connected to the EU,” but he was "ready to give further guarantees, assurances and clarifications that the backstop should only be temporary", which would be designed to assuage some of the key worries from the government's more Eurosceptic MPs.

The backstop is a fall-back mechanism to keep the UK in a customs union with the EU to prevent a hard Norther Ireland border.