Sterling gave up all of its Thursday morning gains amid doubts that U.K. Prime Minister Boris Johnson will be able to pass his draft Brexit deal through the U.K Parliament.
The British pound had reached a five-month high versus the U.S. dollar early on Thursday morning after leaders of both the European Union and the United Kingdom confirmed that a draft Brexit deal had been agreed.
Sterling rose as high as $1.2988 at one stage. The euro also gained against the dollar rising 0.5% versus the greenback. Stocks across Europe rose 0.75% immediately after the reports, with banks leading the gains.
However, following a series of interviews and press statements from opposition lawmakers in the U.K., it became clear that Johnson faces a tough battle to secure U.K. parliamentary consent.
By 1.15 p.m. London time, sterling had given up all of its gains and was half-a-percent lower on the session at $1.2756. The pound also erased its earlier gains against the euro, hitting almost 87 pence. Earlier stock price gains on European indexes also evaporated.
Causing the biggest stir was a statement from Northern Ireland's Democratic Unionist Party (DUP) who said it still had concerns about the deal and would not support it in the House of Commons.
"These proposals are not, in our view, beneficial to the economic well-being of Northern Ireland and they undermine the integrity of the union," said the statement.
The current parliamentary make-up has forced the ruling Conservative Party to effectively act as a minority government. DUP votes are seen as crucial to the U.K. government's success in passing Brexit-related legislation.
The leader of the main opposition, Labour's Jeremy Corbyn, said that Johnson appeared to have negotiated a worse deal than his predecessor Theresa May. Corbyn said he would now back a confirmatory referendum on the U.K.'s exit from the bloc.
"This sell-out deal won't bring the country together and should be rejected. The best way to get Brexit sorted is to give the people the final say in a public vote," he said.
The Scottish National Party, which holds 35 seats in Parliament, has long said it could not vote for a Brexit deal as it would harm the economy of Scotland and go against the majority vote in the 2016 referendum which found two-thirds of Scots wishing to remain in the EU.
Scotland's First Minister, Nicola Sturgeon, confirmed on Twitter that Johnson's deal would also not receive SNP votes in the U.K. Parliament.
Parliament's fourth-largest party, the Liberal Democrats, is the only party openly campaigning to completely cancel Brexit. Its leader, Jo Swinson, told the BBC that Johnson had put forward a Brexit deal containing "the same old things that Theresa May was putting forward, largely."
Swinson also took to Twitter to say she was "more determined than ever" to stop Brexit.
The Conservative-led government will now convene a specially arranged sitting in the House of Commons on Saturday. The government wants MPs to vote on their motion which pits the "Boris deal" versus no deal at all.