The pound continued its losses amid new concerns that the new British prime minister would accept a Brexit deal without a formal deal. The pound fell against the dollar to $1.2418 per pound on Tuesday, its lowest level since April 11, 2017. The British currency fell against the euro to a six-month low.
The pound fell to a three-day low on Tuesday as weak economic data in the United Kingdom put even more tension regaring Brexit, which is due to the end of October. The GBP fell 0.7% on Tuesday, reaching $1.2418 late in the morning. The currency recorded a 27-month low against the US dollar and a six-month low against the euro. In addition to the single European currency, the pound also suffered 10 consecutive weeks of losses – the longest losing streak ever.
In a research note released on Tuesday, analysts on the London Stock Exchange (LSE) described the decline in the pound sterling as “the story of the day” and indicated that there was a possibility that there would be more downside risks. Furthermore, markets are concerned that the volume starts from a very low base and that hedge flows will rise further. Analysts also said they expected a rise in volatility in the pound trade once lawmakers returned to the House of Commons in September after their summer vacations.
The British pound was one of the worst performing currencies this year. The latest factor that led to the sterling’s losses against major rivals is the current race to replace Theresa May as Conservative Party leader and British prime minister. Former London mayor and former foreign minister Boris Johnson is the favorite, likely to defeat Foreign Secretary Jeremy Hunt and become the next prime minister.
The two men took a tough stance on future negotiations with the European Union. In previous meetings with Conservative members, they said they were ready to withdraw without reaching an agreement on Oct. 31. In a televised debate on Monday, they both announced that the Northern Ireland case might limit the UK to an indefinite union with the European Union.
Theresa May’s team agreed with Brussels on support as a means of ensuring that there are no physical borders established on the island of Ireland between Northern Ireland (which is part of the UK) and the Republic of Ireland (a separate country that will remain a EU member state).