Currencies: British pound reaches two-year low on no-deal Brexit concerns

Britain’s Prime Minister Boris Johnson during a speech on domestic priorities at the Science and Industry Museum on July 27, 2019 in Manchester, England. The British pound slid to a fresh two-year low on Monday as concerns about the country leaving the European Union without a deal intensified amid moves by Prime Minister Boris Johnson in his first few days in office. The pound

GBPUSD, -0.7269%

  fell as low as $1.2323, from $1.2382 late Friday, as Johnson and his new Cabinet made clear they were stepping up preparations to leave the EU without a deal. Johnson on Monday was set to unveil a plan to spend £300 million in Scotland, Wales and Northern Ireland. So far he has told EU leaders that he’s not willing to make a deal unless the Irish border backstop is abolished. Michael Gove, who is heading up the government’s preparations for a no-deal Brexit, wrote in the Sunday Times that the government is working on the assumption of a no-deal Brexit. Analysts at Citi said: “If the aim is to call and win an election, early signs are that chances are improving, which reinforces our base case of an election later this year or in early 2020. However, the Boris Johnson government’s honeymoon period with voters could be short-lived if the economy responds as negatively to the no-deal talk as sterling and a 5 percentage point lead over Labour is probably too narrow for comfort.” The Bank of England on Thursday is expected to drop from its statement explaining its interest-rate decision its expectation of “an ongoing tightening of monetary policy over the forecast period.” No interest-rate change is expected. Meanwhile the Confederation of British Industry said in a new report that neither the UK nor the EU were prepared for a no-deal Brexit.

                  

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