LONDON: The pound fell 1.7% to hit a more than five-month low against a rising euro on Thursday, weighed down by fears that the UK-EU trade negotiations may fall apart. After an emergency meeting on Thursday to discuss Britain's attempt to pass a bill which would overwrite the Brexit Withdrawal Agreement, EU executives said the trust between Brussels and London have been "seriously damaged".

The pound was last down at 92.26 pence against the euro, its lowest since March 26. Part of the fall was due to the euro rising after the European Central Bank meeting. Versus the US dollar, sterling fell 1.1% to as low as $1.2856, its weakest since July 28.

"Distrust between the UK and the EU is on an upward trajectory, which is hardly what you would hope for as you're coming to a conclusion of the negotiations. The no-deal probabilities are on an upward trajectory as reflected in the valuations of sterling," said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.

"It's not the end game in terms of the Brexit outcome, but it's looking increasingly likely that the risk of an unintended breakdown of the discussions and an unintended outcome of a no-deal looks increasingly likely," Stretch added.

Investors were watching to see if the bill to undercut the Brexit divorce deal would make the EU leave the negotiating table, but it stuck with the talks. Goldman Sachs analysts said they thought the British government's moves were intended to extract "concessions on the UK's ability to diverge from EU regulatory standards while still enjoying zero-tariff/zero-quota access to EU markets" after the transition period ends this year.

Britain left the EU in January, but is now in a transition period during which it has access to EU markets. It was given a year to agree a new trade deal with the EU.