Sterling falls on fear of challenge to British Prime Minister Theresa May

Sterling fell on Monday as fears grew that the Irish border issue and disagreements within Britain's ruling Conservatives over Brexit could see Prime Minister Theresa May face a serious leadership challenge.

LONDON (REUTERS) - Sterling fell on Monday (Oct 22) as fears grew that the Irish border issue and disagreements within Britain's ruling Conservatives over Brexit could see Prime Minister Theresa May face a serious leadership challenge.

As the clock ticks down towards March 2019, a group of pro-Brexit politicians met with the EU's chief negotiator on Monday. Presenting a paper to Michel Barnier they argue could solve the Irish border issue.

British Member of Parliament and Brexit supporter Owen Paterson said "we believe that using existing techniques, existing processes and all within EU law, we can continue pretty well seamlessly across all borders without damaging the integrity of the European Customs Union and Single Market, which is obviously fundamental for them."

The meeting came a week after Brexit talks stalled over the so-called Northern Irish backstop. But the EU and Britain still can't agree on how to stop the return of a hard border in Ireland. That issue and disagreements inside the UK's ruling party have weighed on sterling, which had it's worst day in a month, that's despite Theresa May's rumoured belief a deal with the EU is almost done.

"The supposedly 95 per cent done deal is an encouraging sign, but it's the remaining 5 per cent which could derail the Brexit deal. We are in a situation where we think a deal is still likely, the most likely outcome but the closer we come to the deadline the harder the negotiation positions will get and the more likely a hard Brexit will become," said Joachim Klement, Fidante Partners Head of Investment Research.

May is still opposed to the EU's Irish backstop proposal Which would keep Northern Ireland in the customs union. But perhaps her biggest challenge now is to deal with opposition within her own party, And the lingering threat of a challenge to her position.