Sterling fell by around 1.1% today after Prime Minister Boris Johnson set out tough terms for Brexit talks with the European Union.

His comments have rekindled fears that Britain would reach the end of an 11-month transition period without agreeing a trade deal. 

The sides have until the end of the year, when a standstill transitional period expires, to secure a deal on trade and future relations.

But Boris Johnson is striking a tough tone, saying Britain will not adhere to the bloc's rules and regulations. 

The EU on the other hand has warned Britain that access to its single market of 450 million people will depend on how far London agrees to adhere to such rules on environmental and labour regulations. 

The moves came as risk appetite stabilised following big falls on Chinese markets, as Beijing took steps to shore up the economy hit by travel curbs and business shutdowns because of the coronavirus outbreak, including cutting interest rates. 

The pound was down 1.5% at $1.301 this evening to mark its biggest one-day fall since December 17. 

Against the euro it had lost 1.2% to 85.1 pence. 

The currency had ended January on a high, with the best weekly gain in a month after the Bank of England kept interest rates steady at 0.75%, surprising some who had expected a 25 basis-point cut. 

Some of today's losses were also due to the dollar reversing some of its weakness from last week.

While investors are more upbeat on sterling than before the December 12 election, newsflow from the trade talks should become a factor for the currency as the two sides spar over terms.

"This will probably characterise negotiations over the next 9-10 months and stands to drag cable back to the lower end of its $1.29-$1.35 range," ING analysts told clients.