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Brexit bill dents pound’s rally

News from the FT that the UK may face an initial Brexit bill of up to €100bn has dented sterling this morning.

The currency fell by 0.2 per cent against the dollar to $1.29, nibbling into some of its eye-catching recent gains before recovering slightly. Against the euro, the pound is also down by 0.14 per cent to €1.1823.

Broadly, the path for sterling since the general election was called has been higher. As Dutch bank ING puts it, “anything less than a hard Brexit will question whether sterling needs to continue trading at extremely undervalued levels.”

But the scale of Britain’s exit fee is a prickly issue in the two-year divorce talks, and €100bn would mark a significant step-up and tougher position from the EU side, after initial costs were pinned at closer to €60bn. Brexit secretary David Davis said today that the country will “not be paying” the new higher amount.

UK prime minister Theresa May has rejected the notion of an exit bill, telling Jean Claude-Juncker, the European Commission president, at a recent dinner that any financial terms would be tied to the UK securing a trade deal with the bloc by 2019.

Michel Barnier, the EU’s chief negotiator, is set to publish a draft negotiating mandate, which is expected to include estimates for a Brexit bill, later today.