The pound weakened on Monday after senior Labour figures cast doubt on the prospect of a cross-party Brexit deal over the weekend, cooling expectations that Prime Minister Theresa May was nearing an agreement with opposition MPs.
Sterling fell 0.4 per cent in morning trading in Asia to $1.3122, after John McDonnell, Labour’s shadow chancellor, said on Sunday that he no longer trusted the prime minister, and that she had “blown the confidentiality we had” and “jeopardised the negotiation”.
He added that Labour’s challenge was negotiating with Mrs May when her premiership was winding down, and all her potential successors were “virtually threatening to tear up” any deal. “We’re dealing with a very unstable administration.”
The currency had jumped 1.1 per cent on Friday after Jeremy Corbyn, the leader of Britain’s opposition Labour party, said parliament had to “get a deal done”, raising hopes that Mrs May’s government could pass a version of her Brexit deal with support from opposition MPs. Mrs May’s deal with the EU has been voted down three times by parliament.
The pound was also boosted last week after the Bank of England signalled on Thursday that it was still inclined to tighten monetary policy.
A final round of negotiations between the government and Labour is due to begin on Tuesday.