- The pound neared one-month lows against the US dollar on Tuesday after fears of a no-deal Brexit resurfaced.
- The Financial Times reported prime minister Boris Johnson may scrap key parts of last year’s withdrawal agreement.
- DeVere Group’s Nigel Green, said: “If the talks fail and there’s a no-deal Brexit, the already vulnerable pound will take another hit. I believe it could fall to $1.20 against the dollar.””
- Visit Business Insider’s homepage for more stories.
Sterling fell towards one-month lows on Tuesday, as investors grew nervous over the prospect that Britain may leave the European Union with no trade deal in place after reports the UK will bypass parts of its withdrawal agreement.
The pound fell 1% against the dollar on Tuesday to $1.31 as of 7:26 am ET, on course for its fifth day of declines and at its weakest since August 25. The euro was up nearly 0.9% against sterling at 90.05 pence, its highest for around three weeks.
The Financial Times reported Monday new legislation from prime minister Boris Johnson’s Conservative government will bypass essential parts of the Brexit withdrawal agreement which may lead to a collapse of trade talks between the UK and the EU.
On Wednesday, the internal market bill is due to published and feature sections that eliminate issues such as state aid and Northern Ireland customs, three confidential sources told the FT.
Johnson has given October 15 as a deadline for the two parties to reach an agreement, threatening that both sides will “move on” otherwise.
Analysts said the pound looked likely to come under more intense pressure as this deadline neared.
Nigel Green, CEO and founder of financial advisory firm deVere Group, said: “If the talks fail and there’s a no-deal Brexit, the already vulnerable pound will take another hit. I believe it could fall to $1.20 against the dollar.”
On Tuesday, the FT further reported the head of the UK government’s legal department Jonathan Jones quit in protest over the proposed changes to the withdrawal deal.
Jeffrey Halley, senior market analyst at OANDA, Asia-Pacific, said: “The UK prime minister’s threat to leave (without) a Brexit deal on October 15 has unsettled markets, which had almost priced out any Brexit risk. That situation is rapidly changing, notably in the options market where volatility has spiked over that time period.”
Neil Wilson, chief market analyst at Markets.com, said sterling may have overreacted to the negative news.
“Whilst we should caution that this indicates disharmony, it is also possibly an overreaction by the market to a negative headline, and does not necessarily make a deal with the EU less likely than it was before,” he said.
Real Life. Real News. Real Voices
Help us tell more of the stories that matterBecome a founding member
Subscribe to the newsletter news
We hate SPAM and promise to keep your email address safe