Brexit Brief: Prospect of no-deal Brexit sends pound to nearly six-month-low
The pound has dipped to the $1.25 mark—the weakest since the beginning of the year—as traders grapple with uncertainty over the Conservative leadership contest and the possibility of both a no-deal Brexit and a U.K. general election.
An 0.5% fall to $1.2531 at 05.02 EST, compared with its value 24 hours before, took the U.K. currency USDGBP, +0.0836% to its lowest level since December 11.
Boris Johnson, former foreign secretary and vocal euroskeptic, remains the clear leader in the Conservative Party leadership contest, which is set to conclude in late July.
Johnson has said he is committed to exiting the European Union on the deadline of October 31—triggering a no-deal Brexit if he has to, which would see the U.K. crash out of the EU without an agreement in place to settle its accounts and lay the groundwork for a trading relationship in the future.
“Currency markets display fear that [Johnson] has said he is prepared to take Britain out on October 31, without a deal if needs be,” said Neil Wilson, an analyst at markets.com.
Fear of a sharp slowdown or recession in the case of a no-deal Brexit has currency traders jittery, and, as the deadline approaches, the currency may continue to decline if a hard Brexit remains an option for the next prime minister.
Sterling has been indicative of businesses’ fears surrounding Brexit-related turbulence: in the past, it has strengthened on the prospect of leaving the EU with a deal and maintaining close ties whereas it has weakened when uncertainty climbs.
The pound also sank to its weakest level since January against the euro, below €1.12.
One of Johnson’s opponents, Michael Gove, environment minister and key figure in the campaign to leave the EU in 2016, has written a scathing article in the Times about the leader of the opposition Jeremy Corbyn. Gove claimed he could “prevent the disaster” of a government led by the Labour Party as well as deliver Brexit.
Meanwhile, a YouGov survey has shown that almost half of Conservative members would be happy for Nigel Farage, longtime anti-EU campaigner and now leader of the Brexit Party, to take over the reins of their party.
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