Pound Drops Amid Brexit Concerns

The pound depreciated against its major counterparts in the European session on Wednesday, as tensions between the U.K. and the European Union flared up after Ireland's deputy prime Minister Leo Varadkar said that his government is making "contingency plans," if Britain triggers Article 16 of the Northern Ireland Protocol.

Speaking on RTÉ's News at One, Varadkar said that triggering Article 16 effectively stops the Protocol and potentially "undoes" Brexit.

His comments came after the Irish government held a meeting of the Cabinet subcommittee on Brexit to dust down and restart its contingency preparations in case of emergency.

"If Britain were to act in such a way that it was resigning from the protocol, resigning from the withdrawal agreement, I think the European Union would have no option other than to introduce what we call rebalancing measures to respond," Varadkar warned.

The pound was further weighed by a strengthening dollar ahead of U.S. inflation data that could influence the timing of the Fed rate hike. The pound touched 2-day lows of 1.2335 against the franc and 1.3501 against the greenback, down from its previous highs of 1.2389 and 1.3565, respectively. Next key support for the pound is possibly seen around 1.22 against the franc and 1.32 against the greenback.

The pound pulled back from its early highs of 153.37 against the yen and 0.8532 against the euro and edged down to 152.78 and 0.8560, respectively. The next possible support for the pound is seen around 150.00 against the yen and 0.88 against the euro.

Looking ahead, U.S. CPI and monthly budget statement for October, wholesale inventories for September and weekly jobless claims for the week ended November 6 are due in the New York session.