The pound drifted lower against its major counterparts in the European session on Tuesday, after comments from a source in Prime Minister Boris Johnson's office suggested that a Brexit deal was "overwhelmingly unlikely" and the talks with the EU would "probably end this week."

The source said German Chancellor Angela Merkel has told the PM that a deal is impossible unless Northern Ireland remain in the European Union's customs union.

Labour blamed No 10 of trying to sabotage the Brexit talks.

If the talks break down, the government will not negotiate further as any delay would be totally pointless, the source said.

Shadow Brexit secretary Keir Starmer called on Parliament to "unite prevent this reckless government crashing us out of the EU".

The latest developments reinforced the possibility for a no-deal Brexit on October 31.

The currency held steady against its major counterparts in the Asian session, excepting the yen.

The pound touched the key 0.9000 mark against the euro, which was its lowest level since September 9. The currency may face support around the 0.92 level.

Figures from the Federal Statistical Office showed that Germany's industrial production rose unexpectedly in August, after a slump in July.

Production grew 0.3 percent month-on-month in August, defying expectations for a 0.2 percent fall.

The pound depreciated to a weekly low of 1.2209 against the greenback, from a high of 1.2302 hit at 2:30 am ET. Next near term support for the pound is likely seen around the 1.21 level.

The U.K. currency fell to near a 5-week low of 130.45 against the yen from yesterday's closing value of 131.81. On the downside, 127.00 is likely seen as the next support level for the pound.

Data from the Ministry of Communications and Internal Affairs showed that Japan household spending rose 1.0 percent on year in August - coming in at 296,327 yen.

That was in line with expectations and up from 0.8 percent in July.

The pound weakened to 1.2098 versus the franc, a level unseen since September 5. The currency is likely to challenge support around the 1.19 mark, if it weakens further.

Looking ahead, at 8:15 am ET, Canada housing starts for September are due.

Canada building permits for August and U.S. producer prices for September are scheduled for release in the New York session.

Federal Reserve Bank of Chicago President Charles Evans will deliver a speech at the Chicago Rotary Club Luncheon at 1:35 pm ET.

At 1:50 pm ET, Federal Reserve Chair Jerome Powell is set to give a speech titled "Data Dependence in an Evolving Economy" at the 61st Annual Meeting of the National Association of Business Economics in Denver.

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