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Pound hits five-day low on Brexit bafflement

The pound slid to a five-day low as the U.K. government continued to search for a solution to the post-Brexit Irish border question, after a mooted deal to clear the way for a future trade deal with the European Union was scuppered at the last minute.

The currency fell as low as $1.338 against the dollar, before climbing back above $1.34, around 0.3% down on the day.

U.K. parliamentarians were granted an urgent session with David Davis, the country's chief Brexit negotiator, after a reported deal struck between Ireland and the U.K. was vetoed Dec. 4 by Northern Ireland's Democratic Unionist Party, or DUP, whose votes provide a majority to Prime Minister Theresa May's minority Conservative government.

May's initial mooted solution, described as "regulatory alignment" between Ireland and Northern Ireland, would have prevented a hard border being erected between the two territories but was shot down by the DUP, which rejects anything that separates its province from the rest of the U.K. It has emboldened pro-Remain campaigners in the U.K., and a number of MPs challenged Davis during the urgent session to explain why the concept could not be applied to the entire country post-Brexit. Sir Keir Starmer, the opposition Labour Party's lead on Brexit, called for the U.K.'s official March 29, 2019, exit date to be scrapped.

While the debate raged in Parliament, there was no sign of progress on the DUP's opposition to the deal struck between the U.K. and Ireland, which has threatened to block a trade deal between the EU and the U.K. if a hard border is established and has the backing of its fellow 26 remaining EU members.

In a statement, the DUP leader in the U.K. Parliament, Nigel Dodds, criticized the "aggressive stance" of the Irish government. Dodds said his party had only received the full text of the proposed deal late on the morning of Dec. 4 and did not like what they read.

"We don't want to see no deal," he said. "We want to see a sensible Brexit and we will continue to work through these issues with the government in the coming days. Text is important and words are important. The text we saw late morning yesterday did not nail down the issues that need to be nailed down."

May is scheduled to return to Brussels before the end of the week in the hope of finalizing a deal on the border, which could enable the Brexit talks to move on to a future trade deal at an EU summit beginning Dec. 14.

Davis said it was possible to have regulatory alignment while being out of the single market and the customs union. This would imply "mutual recognition and alignment of standards — that does not mean the same standards, but one that gives similar results."

Davis, head of the Department for Exiting the European Union, repeatedly stated that his government had been elected on a manifesto to leave the EU's single market and customs union.