Pound Declines As EU Drafts Plan For N.Ireland Control

The pound dropped against its major opponents in the European session on Wednesday amid uncertainty around Brexit negotiations, after the European Union suggested to keep Northern Ireland inside the customs union if a solution to the border dispute cannot be found.

The draft document, published by the EU, proposed a "common regulatory area" on the island of Ireland after Brexit, unless a solution is found.

"The common regulatory area shall constitute an area without internal borders in which the free movement of goods is ensured and North-South cooperation protected," the draft document showed.

The EU said that the transition period will end on December 31, 2020, rejecting U.K. demand to extend it to finalize key issues.

The U.K. Prime Minister Theresa May said no government could ever agree to the draft treaty and she is committed to protect the integrity of the UK.

"The draft legal text the commission have published would, if implemented, undermine the UK common market and threaten the constitutional integrity of the UK by creating a customs and regulatory border down the Irish Sea, and no UK prime minster could ever agree to it," she said.

The currency held steady against its major rivals in the Asian session, with the exception of the yen.

The pound fell to a 6-day low of 0.8847 against the euro, from a 2-day high of 0.8779 hit at 4:45 am ET. If the pound falls further, it may find support around the 0.90 mark.

Flash data from Eurostat showed that Eurozone inflation slowed slightly in February on food and energy prices.

Inflation eased to 1.2 percent from 1.3 percent in January. The rate came in line with expectations.

The pound dropped to 1.3807 against the greenback, its lowest since February 14. The next possible downside target for the pound is seen around the 1.37 level.

The pound weakened to a 3-month low of 147.67 against the yen, after advancing to 149.52 at 7:15 pm ET. The pound is likely to find support around the 144.5 level.

Data from the Ministry of Land, Infrastructure, Transport and Tourism showed that Japan's housing starts logged a double-digit decline at the start of the year.

Housing starts decreased 13.2 percent year-on-year in January, faster than the 2.1 percent drop in December and the expected 4.7 percent decrease.

Following a 2-day high of 1.3117 hit at 4:45 am ET, the pound declined to a 5-day low of 1.3018 against the Swiss franc. On the downside, 1.29 is seen as the next support level for the pound.

Survey results by the KOF Economic Institute showed that a measure of the upcoming trends in the Swiss economy unexpectedly climbed in February, thus stabilizing at a level above its long-term average.

The Swiss KOF Economic Barometer rose to 108 from 107.6 in January, which was revised from 106.9. Economists had forecast the score to ease for a second straight month to 106.

Looking ahead, U.S. pending home sales for January are scheduled for release shortly.