Pound slumps to new two-year low after Boris Johnson takes Brexit hard line

Pedro Gonçalves
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Pound slumps to new two-year low after Boris Johnson takes Brexit hard line

The pound fell to its lowest in two years on growing fears the new premier will steer Britain into an economically damaging no-deal split.

Boris Johnson has used his first days as prime minister to double down on his threat to leave the European Union on October 31, even without an exit agreement in place to protect trade.

The UK government is now working on the assumption that there won't be an agreement with EU officials, one of Johnson's top deputies said over the weekend. A government marketing campaign is meant to prepare the public.

The Withdrawal Agreement is dead, it's got to go"

Amid tough rhetoric from government ministers on Brexit, the pound sank to a two-year low against the euro as investors became nervous at the prospect of the UK leaving the EU at the end of October without an agreement on the terms of its departure.

Sterling fell by more than 1% to €1.10 and $1.22 - its lowest level against the dollar for 28 months.

The decline against the dollar marked the pound's lowest intraday level since April 2017 when the formal legal process of leaving the European Union began as well as a turnaround from the previous session when it achieved its strongest level against the euro in a month.

On a visit to Scotland, Johnson repeated the message he has uttered many times since becoming prime minister last week. "The Withdrawal Agreement is dead, it's got to go," he said.

Speaking during a visit to the Faslane naval base on the Clyde, Boris Johnson said there was "every chance" Britain could get a new agreement with Brussels provided there was "goodwill" and "common sense" on both sides.

The backstop, a plan to prevent the return of a hard border between Ireland and Northern Ireland, was part of former prime minister Theresa May's Brexit deal.

The EU has repeatedly said it will not renegotiate the withdrawal agreement it reached with his predecessor.

Guy Foster, head of Research at Brewin Dolphin said: "The prime minister's negotiating strategy revolves around making the market's most feared outcome look like his preferred outcome. Hence we are seeing a lot of weakness in the pound. That leaves the pound very cheap but sentiment will remain poor unless one side looks ready to seek a compromise. With the EU expecting parliament to prevent a no deal Brexit there will be reluctance to compromise. 

"The prime minister's premiership relies upon building momentum for no deal. That leaves the pound in between an unstoppable force and an immovable object."

With fewer than 100 days left until the UK is due to exit the 28-member bloc on the deadline of Oct 31, Johnson is tearing up the way Britain's government operates to ready the country for the potential impact of a no-deal breakup.

Johnson has packed his Cabinet with pro-Brexit ministers and officials who led the 2016 Vote Leave campaign with him, to ensure every part of the state is geared towards exit day on Halloween.

 

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