LONDON: Rising concerns about a no-deal Brexit hit the pound once more on Wednesday, while stock markets retreated amid renewed trade war worries and uncertainty over the outlook for US interest rates.

The pound dropped to $1.2382, a new low since April 2017.

The euro jumped to a fresh six-month high at 90.51 pence.

Oanda analyst Craig Erlam said there was "little doubt that the threat of no-deal Brexit is what's driving" the pound lower.

The battle to be Britain's next prime minister is entering the final stretch with both candidates hardening their positions on Brexit, putting the future government on a collision course with Brussels.

Ex-London Mayor Boris Johnson, the favourite to replace Theresa May, and foreign secretary Jeremy Hunt, are now both referring to Britain's departure with no overall deal in place as a realistic prospect.

The business community and many lawmakers fear dire economic consequences from a no-deal Brexit which would lead to immediate trade tariffs for certain sectors including the automotive industry.

Market attention Wednesday was also firmly on the dollar awaiting further clues on the US interest-rate outlook.

After last week's optimism sparked by Fed boss Jerome Powell's nod to a cut in rates, investors were taking a more sober view following a number of positive readings on the US economy including on retail sales.

The readings -- while coming alongside figures showing a drop in the manufacturing sector -- revived worries that the Fed will make only one small reduction in borrowing costs this month.

Regarding the US-China trade war meanwhile, US President Donald Trump has said Washington and Beijing were still a long way from a deal and that he still could impose higher tariffs on Chinese imports if he did not get his way.

His latest remarks, hitting out at what he says is a lack of follow-through from Beijing on promises to buy more farm goods, came just as high-level talks were due to take place this week, though a face-to-face has still not been agreed.

There had been hopes of some sort of progress after Trump and Chinese leader Xi Jinping agreed at the G20 last month to restart talks.

Tapas Strickland, senior analyst at National Australia Bank, said there were "no signs that tensions will abate anytime soon".

"China's commerce minister, who is part of the trade negotiations, implied China is preparing for a protracted trade spat and is in no hurry to reach a deal at the expense of losing face," he said in a client note.

On oil markets, both main contracts struggled to recover after tumbling more than three percent on Tuesday as the trade row returned, the dollar held firm and tensions between the US and Iran appeared to be easing.

US Secretary of State Mike Pompeo said Tehran was open to talks if Washington eased sanctions preventing it from selling oil, which is crippling the Islamic Republic's economy.

The developments were the first sign of an easing in the standoff that has raised worries of a conflagration in the tinderbox Middle East.—AFP