There was hope British currency would have a positive day, with productivity reports widely expected to be positive, and Brexit talks – although not completed – appearing to move in a positive direction on Monday.
But the day took a negative turn on both fronts, affecting the pound.
Questions have been asked of Theresa May about what she plans to do in Ireland post-Brexit, and she had proposed an Irish border.
But this was rejected by the DUP – whose support propped up the Conservatives at the last election, and who have a small but significant voice on major decisions.
Explaining how the day’s events have affected the pound, Laura Parsons, currency analyst at TorFX said: “News that the DUP’s opposition to PM Theresa May’s proposal for the Irish border could prevent the UK forging an exit deal with the EU before this month’s summit left Sterling spiralling lower on Tuesday.
“GBP/EUR dropped from its recent highs to hit lows of €1.127.
“Demand for the pound was also limited by the UK’s latest services PMI report, which showed a much sharper-than-expected slowing in output.
“Sterling recouped losses later in the day however as the Eurozone’s retail sales report provided cause for concern. Sales plummeted -1.1 per cent on the month rather than the -0.7 per cent expected, resulting in an annual figure of just 0.4 per cent.”
There is potentially some hope on the horizon for the pound, and Laura continued: “While Brexit news remains a main driver of pound exchange rate movement, GBP/EUR may also fluctuate in response to German factory order figures and the Eurozone’s retail PMIs. Disappointing results would put the euro under pressure.”
Brexit will continue to be the biggest influence on pound sterling in the coming weeks and months.
But what happens now that Britain has missed the “absolute deadline” set by the EU?
The PM has cleared her diary for the rest of the week as she prepares to return to Brussels today for a meeting with Mr Juncker and Michel Barnier in a bid to move negotiations onto the next phase of talks.
A further delay at this stage will increase the chances of a no deal at all – a possibility that could rattle the financial markets.
It could also be a fatal blow for Ms May’s fragile minority government, which is deeply divided on Brexit and relying on the DUP for support.
Failure to reach a…