Pound slides below $1.20 to three-year low as no-deal Brexit battle begins

British Prime Minister, Boris Johnson
British Prime Minister, Boris Johnson

Sterling slumped below 1.20 dollar on Tuesday to a three-year low as Prime Minister Boris Johnson’s implicit ultimatum to lawmakers to back him on Brexit or face an election sent investors scrambling to dump British assets.

The pound, which has now lost 20 per cent of its value since Britain voted to leave the European Union in 2016, fell to as low as 1.1959 dollar, down nearly one per cent on the day.

Barring an October 2016 ‘flash crash’ when sterling momentarily tanked to as low as 1.15 dollar, the British currency has not regularly traded at these levels since 1985.

The battle over Brexit is reaching a crescendo this week.

Mr Johnson on Monday implicitly warned lawmakers he would seek an election if they tied his hands on Brexit, ruling out ever countenancing a further delay to Britain’s departure from the European Union, its largest trading partner.

Lawmakers will vote on Tuesday on the first stage of their plan to block Mr Johnson from pursuing a no-deal Brexit ahead of the October 31 deadline.

Investors are panicking that Britain will either crash out of the bloc on October 31 without a transitional deal to ease the divorce, or face a parliamentary election that sows uncertainty at a time when the economy is struggling with a global slowdown exacerbated by a trade war between Washington and Beijing.

Banks raised their estimates for the likelihood of a no-deal Brexit. UK domestic-focused stocks such as housebuilders skidded lower as concerns about a hit to the British economy grew.

“The next 48 hours are potentially quite significant and sterling shows you that,” said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.

“The next 48 hours will determine whether or not this high-risk strategy from the prime minister has paid off, or whether or not he has been corralled into a corner, or conversely still there a several options where we are simply going for the uncertainty of an election mid-October.”

Mr Milligan said sterling, on a fair value basis, looked undervalued after much of the uncertainty had been priced in, but he added: “As we see with many currencies in extreme circumstances, it is very easy for a currency to hit an air pocket.”

Against the euro, the pound’s decline was much more contained on Tuesday, falling 0.2 per cent to a two-week low of 91.33 pence.

More weakening

Morten Lund, a senior currency analyst at Nordea, said he expected the pound to weaken further against the euro and beyond a three-year low of 93 pence touched in August.

“It’s difficult not to see a route where this doesn’t end in an election,” he said.

Volatility gauges for the pound jumped as investors braced for more wild swings in the weeks and months ahead.


Coronavirus Quiz:

Coronavirus factsheet


PT Mag Campaign AD

Support PREMIUM TIMES' journalism of integrity and credibility

Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.

For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.

By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.


TEXT AD: To advertise here . Call Willie +2347088095401...

BE THE FIRST TO KNOW! Subscribe to our newsletter

* indicates required


Now available on

  Premium Times Android mobile applicationPremium Times iOS mobile applicationPremium Times blackberry mobile applicationPremium Times windows mobile application

All rights reserved. This material and any other material on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from PREMIUM TIMES.