The pound has fallen more than 1% against the dollar as fears among traders of a no-deal Brexit intensified following major speeches by UK Prime Minister Boris Johnson and EU chief negotiator Michel Barnier.
At midnight a pound was worth 1.318 dollars, but by midday on Monday it was down to 1.305 dollars – a fall of 1%.
The falls particularly hit from 10am onwards, as Mr Barnier laid out a draft mandate calling for “reciprocal access” for fishing vessels if a free trade agreement is to be signed.
Mr Johnson later said he would be willing to walk away from the year-long talks if the EU did not fall into line and agree to the UK’s demands.
He said: “There is no need for a free trade agreement to involve accepting EU rules on competition policies, subsidies, social protection, the environment or anything similar, any more than the EU should be obliged to accept UK rules.”
Investors has consistently warned against a no-deal Brexit, with businesses concerned trade could be hit significantly.
Currency markets, which operate 24 hours a day, tend to be a better indicator of business concerns in the UK because the majority of FTSE 100 listed businesses are focused on international markets.
Neil Wilson, chief market analyst at Markets.com, said: “The way the two sides have come out, traders are starting to consider no-deal risks again.
“No deal is not the base case by any means but the EU and UK look in very different places right now at the start of talks.
“It’s going to be a very long and rocky road to get there and the shape of the deal will hinge on some important concessions on both sides.
“The British government has come out swinging over the weekend with plenty of fighting talk, but they’re up against a tough opponent.”
Ranko Berich, head of market analysis at Monex Europe, added: “Today’s sterling price action has a feel of groundhog day: signs of tension in EU-UK trade negotiations have caused the pound to drop some 1% today.
“But on the whole, although Barnier and Johnson have indeed set out markedly different visions for trade relations, the UK Prime Minister was careful not to emphasise any of the sort of red lines that sunk his predecessor’s negotiations with the EU.”