(Bloomberg) --
The pound tumbled after a report that Brexit talks were failing to close differences on a trade deal and the European Union planned legal action against the U.K.
Sterling snapped a three-week winning streak after news that the U.K. and EU remain split on the issue of state aid, a sticking point in the trade negotiations. The currency deepened losses after a report that the EU would take the first step in a legal process against the U.K. for breaching the terms of its Withdrawal Agreement from the bloc.
“There is further downside ahead for the pound,” said Neil Jones, head of foreign-exchange sales to financial institutions at Mizuho Bank.
The impasse comes after several days of a more conciliatory tone from British and European officials that had helped the pound rally from a two-month low last week.
The pound fell 0.8% to $1.2822 by 9:50 a.m. in London, and also dropped 0.8% to 91.44 pence per euro.
Negotiators are due to discuss state aid later Thursday, after Britain submitted a new round of proposals on how its rules will work after Brexit.
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