The pound has fallen to its lowest in 11 months this morning, following warnings over the weekend by international trade secretary Liam Fox that it was now more likely the UK would leave the EU without a deal.
Sterling fell 0.3 per cent to $1.2954, its lowest since July 19, making it the biggest loser against a resurgent US dollar among major currencies.
It also fell 0.2 per cent against the euro to 89.15 pence.
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Fox put the chances of a no deal at “60-40”, in an interview with the Sunday Times, adding that "intransigence" from the European Commission is "pushing us towards no deal".
This would means UK-EU trade defaults to World Trade Organisation terms at the end of March 2019, when the official Brexit process ends, without a transitional period, which has ratcheted up fears of the worst-case cliff edge scenario in the City and beyond.
This morning Downing Street sought to clarify Fox's remarks.
A spokesperson said: "We continue to believe that a deal is the most likely outcome because reaching a good deal is not only in the interests of the UK it is in the interests of the EU and its 27 members.
“But the international trade secretary is right to say there is a risk of the negotiations not succeeding and the government has to prepare for all eventualities.”
On Friday Bank of England governor Mark Carney said the chances of a no deal on Brexit were "uncomfortably high", sending the pound below $1.30 for much of the day.
Calls are now growing for the Article 50 process to be extended in the hope that a deal can be reached with a few extra weeks.