No-deal Brexit fears push pound closer to parity with the euro
The pound fell by 1pc against the euro yesterday as a series of officials from the new administration of prime minister Boris Johnson delivered warnings that a no-deal outcome is now a real prospect.
The British pound has cemented its position as the worst-performing major currency in the world since Mr Johnson took office last week, and it traded below 90p to the euro, closing at 90.853 in European trading hours.
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British foreign secretary Dominic Raab said Mr Johnson would not reopen talks with the EU on Brexit unless the backstop was changed, and while Mr Johnson himself struck a more emollient tone later in the day, he too insisted the backstop had to go.
Investment bank ING warned that in the event of a no-deal Brexit, the pound could fall to parity with the euro. It put that scenario at a 20pc likelihood, assigning a 40pc likelihood to an early election, which would see an extension to the withdrawal agreement.
The only poll taken since Mr Johnson became PM showed the Conservatives in the lead with 28pc of the vote, according to Comres, up three percentage points.
"The pound started weakening sharply today, with the market awaking to the reality of a new UK government, its rather combative stance on the current EU-UK Brexit deal and its open remarks on the rising probability of a no-deal Brexit," said Petr Krpata, ING's head of Europe, Middle East and Africa foreign exchange analysis.