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Pound Heads Back Towards 5-Month Lows On No-Deal Brexit Fears

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Sterling edged back towards five-month lows on Wednesday after the top contender to replace Prime Minister Theresa May reaffirmed his desire to take Britain out of the European Union with or without any agreement.

Boris Johnson told the BBC he was “serious” about leading Britain out of the EU on the Oct. 31 deadline without a deal if the bloc refused to negotiate a new exit agreement.

“We are heading for a showdown – a no-deal Brexit; a general election; or a second referendum,” said Derek Halpenny, European head of global markets research at MUFG Bank in London.

“The pound is set to come under renewed downward pressure over the coming weeks with no deal still very much under-priced.”

Against the dollar, the pound slipped 0.2 per cent lower at 1.2664 dollar, after reaching a five-month low of 1.2507 dollar last week. Versus the euro, the pound weakened to 89.69 pence.

The next Conservative party leader will be elected by the end of July, leaving only a few months to try to renegotiate a Brexit withdrawal agreement.

CFTC data at the end of last week showed traders had cut “net sterling shorts” by 563 million dollars, but remained heavily short the pound.

 

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