The pound has fallen against major currencies as the prospect of a no-deal Brexit returns.
Sterling was already nudging lower after the government ramped up rhetoric on Brexit, saying the UK would “prosper mightily” with or without a deal.
On Tuesday the pound fell 1.6% to just over $1.30. It fell a similar amount against the euro, to €1.10.
Markets were also unsettled by the resignation of the government’s legal department head, Sir Jonathan Jones.
No reason was given for his resignation but the Financial Times reported that he was “very unhappy” amid speculation about changes to the Withdrawal Agreement.
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The clock is ticking on an October deadline for a trade deal and the end of the status quo transition arrangement in late December.
Sterling’s downward move on Tuesday came after several months of the pound rallying against the dollar.
“I sense participants are turning bearish on elevated chances of a no-deal Brexit” said Neil Jones, head of hedge fund sales at Mizuho. “We should be in store for a further pound sell-off.”
Sebastien Clements, currency analyst at international payments company OFX, said: “It looks like the wheels of the Brexit bus are finally falling off.”
After the EU referendum in 2016, the pound dropped sharply, falling at one point more than 10%.
Since the coronavirus struck earlier this year, sterling had been largely settled, with few sharp swings.
Sir Jonathan’s resignation followed reports of anger over suggestions Prime Minister Boris Johnson is planning to override elements of the Brexit Withdrawal Agreement, which became international law when the UK left the EU in January.
The UK is due to end the transition period which keeps UK rules aligned with the with EU until the end of this year. On Tuesday, the UK and EU began the latest round of trade deal negotiations which will cover the terms of the new, independent relationship.
Experts warn the pound could be in for a new round of buffeting if the prime minister’s stand-off with the EU continues.
- UK economy
- Pound Sterling (GBP)
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