Sterling slumped against the dollar again on Monday morning after UK Government ministers talked up the prospects of a “no deal” Brexit next March.
The currency was down 0.36 per cent against the dollar at $1.2959, close to an 11-month low.
Against the euro sterling was trading at €1.1212, down 0.2 per cent on the day.
The International Trade Secretary, Liam Fox, said over the weekend said that there was now a “60-40” chance of the UK crashing out of the European Union without an withdrawal agreement due to the “intransigence of the EU”.
And “senior Whitehall sources” were quoted by the Daily Telegraph on Monday saying that if the UK crashes out with no deal “we will make it clear whose fault it was”.
Trade groups and credible economists have warned that the consequences of such a rupture would be disastrous for the UK – and significantly worse for Britain than the rest of the EU.
“Just-in-time” corporate supply chains would be severed due to the sudden imposition of customs checks and retailers have warned of a serious risk to food supplies from the Continent.
The new Brexit secretary Dominic Raab has said the Government will make plans to ensure an “adequate food supply”.
No deal pound pressure
The Governor of the Bank of England, Mark Carney warned last week that the chances of a no deal Brexit were “uncomfortably high” and urged policymakers to “do all things to avoid it”.
The Bank raised interest rates to 0.75 per cent last week, the highest level in nine years, but Brexit headwinds meant the increase did little to support the value of the currency.
“The voices forecasting a hard Brexit are becoming increasingly shrill. The [foreign exchange] market is slowly beginning to work out that these people might successfully torpedo a constructive solution,” said Ulrich Leuchtmann of Commerzbank.
Other financial data shows that traders’ ”net short” bets on the pound – wagers that the currency will fall in future – are at the highest level in 10 months.
