The United Kingdom and the European Union have failed to agree on the terms for Brexit after a meeting between British Prime Minister Theresa May and European Commission President Jean-Claude Juncker. In a press briefing after Monday's meeting in Brussels, Juncker said that there were still two or three issues that needed to be agreed. The EU head added that he felt sufficient progress between the parties could be achieved by the time of the EU leaders summit on December 14. "We had a frankly constructive meeting ... She is a tough negotiator, and not an easy one. She is defending the point of view of Britain with all the energy we know she has," Juncker told reporters.

May agreed that a positive conclusion was still within grasp and that talks would continue later this week. Sterling moved down from its session highs to sit lower on the day by almost a tenth of 1 percent. Earlier, Sterling had soared higher amid optimism that Brexit talks would break the current deadlock and move forward to discuss a future trade deal between the two sides. Britain and the EU have reportedly agreed to avoid a hard border on the island of Ireland, preventing what many have called a "political calamity" and potentially severe economic fallout for the Republic of Ireland, for whom the U.K. is a crucial trading partner. At around midday, the pound hit a day's high of 1.3523 against after news emerged that Westminster will concede on using EU trade rules for Northern Ireland. The U.K. has reportedly accepted there will be "no regulatory divergence" of the EU's current customs union and single market rules for Northern Ireland after Brexit, according to RTE. The concession has yet to be accepted by the Irish government, however.

'No physical border'

The Irish and U.K. governments have been at loggerheads over the EU customs union, which exempts all member states from paying customs duties on goods traveling within the union and requires highly uniform regulatory standards. The union has saved huge costs for businesses over time and enabled quicker movement of goods. U.K. Trade Secretary Liam Fox in November insisted that the U.K. and its province of Northern Ireland would leave the customs union post-Brexit while somehow avoiding a hard border. The Irish government, meanwhile, asked that Northern Ireland remain in the customs union, believing that to be the only way to prevent imposition of a physical border between Ireland and its northern neighbor, with whom it trades extensively. The Daily Telegraph had reported earlier the afternoon's developments via Twitter, but there has been no official confirmation of a deal. Tweet1 That news appeared to have reassured markets that trade and political stability on the island will not be fundamentally threatened by Brexit, and that Britain can likely move onto the next stage of talks surrounding its trade relations with EU states. EU officials had been quoted saying there is an "80 percent chance and rising" that a settlement is in site, the Telegraph reported.

Why this is a relief for Ireland

The U.K. is Ireland's second-largest trading partner after the United States. In the absence of the customs union, Irish exports to the U.K. would be subject to WTO tariffs, which are often in excess of 50 percent. Economic modeling by the Irish government has found that this would effectively wipe out 20 percent of Ireland's exports to the U.K. This concession by May's government means that EU customs union rules for regulatory standards will remain in place, protecting the free movement of goods between the U.K. and Ireland and ensuring there will be no hard border post-Brexit.