The pound declined against its major counterparts in the European session on Thursday amid risk aversion, as optimism surrounding U.S.-China trade talks evaporated and weak earnings results dragged down retailers.

Although trade talks reportedly ended on a positive note on Wednesday, it remains to be seen if China had offered enough concessions on structural issues to overcome U.S. skepticism.

China's ministry of commerce said that the negotiations were "extensive, deep and meticulous".

The U.S. government shutdown entered the 20th day, after Trump walkout from the meeting with House Speaker Nancy Pelosi and Senate Minority Leader Senator Chuck Schumer at the White House on Wednesday.

While Trump called the meeting "a total waste of time," Democrats blamed him of throwing a "temper tantrum."

Investors awaited the Brexit process, after U.K. Parliament demanded the May government to work on a plan B should her Brexit deal is voted down next week.

On Wednesday, the Parliament carried out an amendment, which forces May to come up with an alternative plan within three working days after next week's vote, instead of the 21-day time limit set out in the Withdrawal Act.

The pound dropped to 1.2747 against the greenback, from a high of 1.2801 hit at 7:00 pm ET. If the pound falls further, 1.25 is possibly seen as its next support level.

The pound depreciated to a 6-day low of 137.60 against the yen and held steady thereafter. The pound is seen finding support around the 134.00 region.

Preliminary data from the Cabinet Office showed that Japan's leading economic index dropped to a two-year low in November.

The composite leading index fell to 99.3 in November from 99.6 in October. Economists had expected the index to remain unchanged. The pound slipped to a weekly low of 0.9053 against the euro, from yesterday's closing value of 0.9026. The next possible support for the pound is seen around the 0.88 level.

The U.K. currency that ended yesterday's trading at 1.2460 against the franc declined to a weekly low of 1.2419. The pound is likely to find support around the 1.22 region.

Looking ahead, the European Central Bank's minutes from December 12-13 meeting are due at 7:30 am ET.

In the New York session, U.S. weekly jobless claims for the week ended January 5, Canada building permits and house price index for November are scheduled for release.

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