LONDON (Reuters) -The pound extended its losses against the dollar and the euro on Thursday, and one-week implied volatility gauges rose to their highest since March, as market participants became more cautious about the risk of a no-deal Brexit. The pound dropped late on Wednesday, after a dinner between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen ended with both sides still “far apart”. It extended these losses early in the European session, and was down 0.9% versus the dollar at $1.3281 at 1535 GMT. Against a stronger euro, it was down around 1.3% on the day at 91.27 pence. “Given there was no breakthrough in the talks last night, market participants are becoming more fearful over the risk of a no-deal Brexit outcome,” said MUFG currency analyst Lee Hardman. The British currency has been jittery on Brexit headlines, dropping in response to news suggesting a deal is unlikely and rising when hopes are raised. Options markets indicate that traders expect further price swings in the pound. Implied volatility gauges with a one-week maturity, for both cable and euro-sterling, rose overnight to their highest since March and continued to rise during the European session. Speculative positioning on the pound is only slightly bearish - speculators have cut their net short position in recent weeks - meaning that a short squeeze is not expected in the event of a positive outcome. “Positioning data that we’ve been following is showing more that market participants are more reluctant to participate in pound positioning at this point in time given all the uncertainty over the Brexit outcome,” said MUFG’s Hardman. “There’s risks both ways, so unless you’ve got a strong view on how the talks are going to proceed, it’s difficult in the spot market to position for that right now. It could still go either way,” he added. Britain’s transition period with the EU is due to end on Dec. 31. Until then, it remains in the EU single market and customs union, meaning that rules on trade, travel and business have stayed the same. Many investment banks say that a Brexit deal will be reached at the last minute. But JP Morgan reduced its estimate for the chances of a deal being reached to 60% from 66% on Thursday. Bookmakers Paddy Power and Betfair offered odds with a 50% probability of a no-deal, while betting exchange Smarkets saw no-deal odds rise to 58%. Britain has told the EU that it should make significant concessions to break the deadlock by the end of the weekend. Market participants are now focused on Sunday as a possible deadline by which progress may be made.