LONDON (BLOOMBERG) - The pound is headed for its biggest weekly decline in a month amid speculation that potentially painful Brexit negotiations will prompt the Bank of England to ease monetary policy further.

Sterling fell against all of its 16 major peers on Friday (Sept 16) as the Telegraph newspaper cited five unidentified senior EU officials saying that Britain will face a "bureaucratic nightmare" in the talks, and that "reality" even may persuade it to not follow through with the voter-approved exit.

While the BOE's Monetary Policy Committee members voted unanimously to keep its key interest rate and asset-purchase target unchanged on Thursday, they signaled further easing cannot be ruled out.

"Some of the political discontent we've seen recently has revived the concerns around what the Brexit will really look like," said Mr Chris Chapman, a London-based trader at Manulife Asset Management.

"We still believe the pound will go lower. The BOE is acknowledging the recent recovery in economic indicators but also remains cautious as it considers the longer-term impacts of Brexit uncertainty."

The pound fell 0.2 per cent to US$1.3207 as of 10am London time, down 0.5 per cent in the week. That's the biggest decline since Aug 12. It weakened 0.2 per cent to 85.06 pence per euro.

Sterling touched a 31-year low of US$1.2798 on July 6 and is still down 11 per cent versus the dollar since the June 23 referendum. The median analyst forecast is for the pound to fall to US$1.28 by year-end.

UK government bonds advanced. Benchmark 10-year gilt yields dropped three basis points, or 0.03 percentage point, to 0.86 per cent. The 1.5 per cent security due in July 2026 rose 0.30, or 3 pounds per 1,000-pound face amount, to 106.025.