The pound came under renewed pressure Thursday as Germany's Chancellor Angela Merkel reiterated her preference for a so-called "Hard Brexit" and British business leaders hit back at Prime Minister Theresa May's EU exit strategy.
Sterling dipped below the 1.27 mark against the U.S. dollar during the London trading session, nearly matching the 31-year low of 1.2685 and further hampering confidence in Europe's third-largest economy. The downward move, however, failed to lift UK stocks, which have largely traded inversely to the pound's decline since the June 23 Brexit vote. The benchmark FTSE 100 index traded around 10 points lower, or 0.3%, by mid-day in London, while sterling was quoted at 1.2698 against the greenback.
The declines followed sharp comments from Merkel, who told a German industry conference in Berlin that she would not support a Brexit deal that would separate membership of the single market from the free movement of people around the EU.
Britain's biggest industry lobby, the Confederation of British Industry, or CBI, has also heaped pressure on the government's plans to prioritize immigration over single market access, saying in a statement late Wednesday that "businesses will not welcome further restrictions on high skilled migration from key trading partners around the world, especially as a series of changes were only announced earlier this year."
May pledged Wednesday to take control of and to toughen immigration rules governing entrants from the EU, in addition to promising to reassert the supremacy of British courts on questions of law.
The Prime Minister's remarks followed a speech by her cabinet colleague, Amber Rudd, who now occupies May's previous position as Home Secretary, that suggested broadest crackdown on immigration in the U.K. for decades.