Sterling falls to 3-week low vs euro as 'no-deal' Brexit worries flare

Olga Cotaga and Elizabeth Howcroft

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

LONDON, Oct 8 (Reuters) - Sterling fell to a three-week low against the euro on Tuesday as concerns lingered that sizeable differences between Britain and the European Union remained with less than a month left to strike a Brexit withdrawal deal before the Oct. 31 deadline.

The British government is preparing for Brexit negotiations to end this week, according to a report in the Spectator magazine.

But the magazine reported that Irish Prime Minister Leo Varadkar did not want to talk and said French President Emmanuel Macron and German Chancellor Angela Merkel were not likely to push the EU to discuss Britain's offer unless Ireland is ready to negotiate.

The stalemate was keeping sterling on the back foot at $1.2276, having pushed it to a six-day low of $1.2260 earlier. Against the euro, the pound was down 0.3% at 89.55 pence, the lowest since Sept. 13.

Nomura's forex strategist Jordan Rochester said he was taking the Spectator report "with a huge pinch of salt".

"On the surface, it raises the chances of 'no-deal' marginally," Rochester said. However, "because we're in this limbo with Brexit, any headline moves the market", he said.

Last week, Britain sent a proposal to Brussels to replace the Irish border "backstop" - an insurance policy to keep the border open between the Republic of Ireland and the British province of Northern Ireland - but the proposal has been rebuffed by EU leaders.

Prime Minister Boris Johnson has repeatedly vowed to take Britain out of EU on Oct. 31 even without a divorce deal in place, but a law called the Benn Act requires him to seek a delay if the UK cannot agree a withdrawal deal by Oct. 19.

A report in the Daily Telegraph on Monday said Johnson intended to challenge that law in the Supreme Court.

(By Olga Cotaga and Elizabeth Howcroft; Editing by Kevin Liffey)