SterlingImage copyright PA Media

The pound has continued to edge lower on currency markets as the government insists that the UK is prepared to leave the EU without a deal.

Sterling fell in overnight trade in Asia to a two-year low of $1.2152 against the dollar.

The currency also lost ground against the euro, falling to €1.0912.

Under new Prime Minister Boris Johnson, the government has toughened its stance on a no-deal Brexit, which it has said is “now a very real prospect”.

The pound – which was trading at $1.50 against the dollar before the EU referendum in June 2016 – has dropped by 2.4% since Monday, when a spokeswoman for Number 10 said that the UK would not enter talks with Europe unless the co-called Irish backstop is scrapped.

She said that because the EU has said it is not willing to renegotiate on this point, “we must assume there will be a no-deal Brexit on 31 October.”

Mr Johnson appeared to strike a slightly softer tone on Monday afternoon, when he said he would “hold out the hand” and “go the extra thousand miles” to strike a new Brexit deal.

However, it was not enough to stop the overnight slide in sterling.

Laura Lambie, senior investment director for Investec Wealth & Investment, warned that the pound could fall further if the UK crashed out of the EU without a deal.

“I do think that investors are looking at a no-deal as a risk, not a certainty,” she said. “That does mean that if we do come out of the EU without a deal, then sterling has further to fall.”

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