* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
LONDON, Dec 2 (Reuters) - Sterling fell to a one-month low
against the euro and also dipped momentarily below $1.33 on
Wednesday as Britain and the European Union quickly approached a
make-or-break moment in trade talks, with many investors
doubting a deal will be reached.
Negotiators were reportedly stuck on differences over
fisheries, state aid for companies and rules to resolve
disputes, offsetting any optimism from Britain becoming the
world's first country to approve the Pfizer-BioNTech COVID-19
The next 36 hours will be crucial for the British currency
as investors focus on negotiations Thursday between Brexit
envoys Michel Barnier and David Frost, said Jeremy Stretch, head
of G10 FX strategy at CIBC Capital Markets.
Barnier told ambassadors that Brexit talks would be thrust
into crisis if a UK legislation expected next week includes
clauses that would breach the existing withdrawal agreement.
A spokesman for Prime Minister Boris Johnson said
Britain stood by the clauses in the legislation.
Ireland's foreign minister warned that if the bill
deliberately breaches the Brexit divorce accord, it will be
taken as a signal that London does not want a trade deal.
"We are getting very close to the end game now," Stretch
said, adding that a European Council meeting on Dec. 10 in
Brussels would also be seen by investors as a deadline by which
to clinch a deal.
Britain left the European Union in January, with a one year
transition period to negotiate a future trade deal with the bloc
expiring at the end of this month.
"When you have a hard stop in terms of negotiations and you
still have little movement in terms of political
concessions...the risk of an unintended outcome becomes that
little bit more likely," Stretch said.
European Union member states urged the bloc's chief Brexit
negotiator on Wednesday not to be rushed into agreeing an
unsatisfactory trade deal with Britain just because the Dec. 31
deadline is looming, a senior EU diplomat said.
Sterling last traded at $1.3329, down 0.7% on the
day, after briefly falling to $1.3288 earlier, its weakest since
Friday. Against the euro, it hit Oct. 27 lows of 90.83 pence
. It was last down 0.8% against the common currency.
Investors' jitters were felt across derivatives markets,
where costs for sterling options have increased to their highest
since the beginning of November across short and medium-term
Overnight implied volatility gauges - derived from those
costs - rose above 13%, the highest since Nov. 3.
Leveraged funds kept a short position in the British
currency in the week to Nov. 24, according to latest Commodity
Futures Trading Commission data.
The pound hit a three-month high against the dollar on
Tuesday evening after UK broadcaster Times Radio said the trade
deal talks had entered the "tunnel" stage of negotiations.
But the mood switched among traders as the EU's Brexit
negotiator told the 27 national envoys to Brussels that
differences persisted, according to a senior EU diplomat present
at a closed-door briefing.
"The fact that there was a briefing completely pushed back
against the view that negotiations have entered a tunnel phase,"
That development overshadowed news that Britain had become
the first western country to approve a COVID-19 vaccine, which
it is likely to start rolling out next week.
(Reporting and Olga Cotaga and Thyagaraju Adinarayan; Editing
by Saikat Chatterjee and John Stonestreet, Kirsten Donovan and