The pound has fallen to fresh two-year lows against the dollar after the two candidates to be the UKs next leader declared the Northern Ireland backstop to be “dead,” ramping up the chances of a no-deal Brexit.
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Both Boris Johnson and Jeremy Hunt yesterday said they will ditch the backstop, a key part of Prime Minister Theresa Mays Brexit deal with the European Union, even if the bloc pledged to lift it after a set period of time.
Yet Brussels has said repeatedly said Britain must accept the plan, which is designed to stop a hard border returning between Ireland and Northern Ireland. Johnson and Hunts statements have been seen by traders as increasing the risk of a no-deal outcome.
Sterling had dropped 0.7 per cent against the greenback to $1.243 by 12.30pm UK time. It had also fallen 0.4 per cent to a six-month low against the euro of €1.107.
The fall means the pound has now been the worst performing currency against the dollar over the past month, as well as over the past year.
Even todays release of better-than-expected wage growth figures, which showed pay growth picked up to 3.6 per cent in May, could not stop the pounds fall.
Investec chief economist Philip Shaw said the falling pound was “an indication that in terms of currency drivers, domestic fundamentals have once again begun to give way to Brexit issues”.
Craig Erlam, senior market analyst at foreign exchange company Oanda, said: “Traders are finding it hard to look past no-deal risks or at the very least a delay and hard Brexit, which continues to weigh on the currency.”
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