The pound has fallen against the Euro and the US Dollar and faces an uncertain future as UK prime minister Boris Johnson prepares to deliver a speech confirming his final Brexit offer.
The new plan to take Britain out of the European Union was roundly rejected by Ireland on Tuesday, after details emerged including customs checks on the Republic’s northern border and a regulatory border in the Irish Sea for four years, effectively tying Northern Ireland to the EU until 2025.
Taoiseach Leo Varadkar told the Irish parliament on Tuesday that he expected Britain to honour the promise it made in December 2017 that there would be “no hard border as a consequence of Brexit”.
Sterling tumbled by more than half a per cent against the euro after Mr Varadkar’s government warned it was likely to reject the new plan. The pound sank to $1.2247 as Mr Johnson spoke at the Conservative conference in Manchester. Irish foreign minister Simon Coveney said the reported proposal would not provide the basis for a deal, adding that the proposal was "concerning".
Investors shared his scepticism: "I don’t sense an agreement between the two sides," said Neil Jones, head of European hedge fund sales at Mizuho. Therefore, "we’ll see a lower sterling" going forward.
Mr Johnson’s offer will make clear that if the EU does not engage with the proposal, Britain will not negotiate further and will leave on October 31.
The fall came despite a better than expected performance of the UK manufacturing sector.
The pound had mounted a comeback in September after it hit its lowest value against the dollar since January 2017 in August.
With less than a month until Britain is due to leave the EU, it remains unclear how Britain will carry out its biggest trade and foreign policy shift in more than 40 years. It might leave with a deal, without one or not leave at all.