The pound dropped against its key counterparts in the European session on Thursday, as the European Union's chief Brexit negotiator Michel Barnier suggested that the negotiations over financial settlement had reached a "deadlock" and he will not recommend the start of discussions on future trade relationship with the EU.

"I am not able in the current circumstances to propose next week to the European Council that we should start discussions on the future relationship," Barnier told at a news conference in Brussels.

Barnier said that agreement was needed on the financial settlement, EU citizens' rights and the Irish border before moving into discussions about a future relationship.

The "deadlock" on payments was "disturbing," Barnier said, adding that there could be "no question of making concessions" on these issues.

The latest Credit Conditions Survey from the Bank of England showed that UK banks tightened conditions for unsecured lending to households and are expected to reduce its availability significantly at the end of the year.

Meanwhile, availability of secured credit to households increased slightly in three months to mid-September and lenders forecast its availability to be unchanged in the fourth quarter.

The pound was higher against its major rivals in the Asian session.

The pound hit 3-day lows of 147.30 against the yen and 1.3122 versus the dollar, off its early weekly high of 149.07 and an 8-day high of 1.3265, respectively. The next possible support for the pound is seen around 146.00 against the yen and 1.30 against the greenback.

The pound slipped to a 4-week low of 0.9033 against the euro and a 6-day low of 1.2784 against the franc, from its early high of 0.8950 and and a 3-day high of 1.2903, respectively. Continuation of the pound's downtrend may see it challenging support around 0.915 against the euro and 1.265 against the franc.

Looking ahead, at 10:30 am ET, the European Central Bank President Mario Draghi and Federal Reserve Governor Lael Brainard participate in a panel discussion about monetary policy at the Peterson Institute for International Economics, in Washington DC.

Simultaneously, Federal Reserve Governor Jerome Powell will give a speech titled "Prospects for Emerging Market Economies in a Normalizing Global Economy" at the Institute of International Finance Annual Membership Meeting, in Washington DC.

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