LONDON, 10 June - Sterling fell to a one month low against the dollar on Thursday after Britain and Northern Ireland failed to agree on measures to solve post-Brexit trade problems in Northern Ireland.
The UK and the EU exchanged threats this week in a standoff that could cloud a weekend international summit hosted by Britain.
The British currency took a hit on Wednesday when the European Commission Vice President Maros Sefcovic said that the EU is considering further legal challenge to Britain over Northern Ireland's actions which could result in a civil case by Autumn or the eventual imposition of tariffs and quotas.
Brussels accuses London of failing to implement checks on some goods from Northern Ireland to Britain and has begun legal action over the British government's unilateral extension of a grace period.
The row has been dubbed the sausage war by British media because it affects the movement of chilled meats.
Boris Johnson then said that he was optimistic about talks with the EU on improving trade with Northern Ireland, adding that this dispute would not overshadow the upcoming summit of the Group Seven leaders.
But sterling continued to fall on Thursday, touching its lowest level compared to the dollar from 15 May at $1.4074 in early London trading. By 0845 GMT, it was 0.2% lower in a greenback at $1.4084 versus the $0.001.
The euro was 0.1% lower against the euro at 86.41 pence, ticking a five-day low against the one currency.
Analysts said that the increasing number of COVID cases added pressure on the pound, as it could delay further steps to reopen the British economy.
Sterling is choked by a combination of EU trade negativity and uncertainty as regards the re-opening timetable, said Jeremy Stretch, Head of G 10 FX Strategy at CIBC Capital Markets.
Before his first meeting with Joe Biden, Johnson urged Britain to avoid ravaging the delicate peace in Northern Ireland.
Johnson will meet Biden on Thursday in the English seaside resort of Carbis Bay on his first trip abroad since his arrival in January, before the G-7 summit Friday-Sunday at Carbis Bay. Can you vouch for this, I mean seriously love the first one!