Pound Plunges to 11-month Low Amid Fears Of A No Deal Brexit

Photo by Chatham House via Flickr

Last Monday morning, the pound has dropped to its lowest in 11 months. It comes after the warnings that were disclosed by Liam Fox, the international trade secretary of the United Kingdom, over the weekend that it was now more possible that the United Kingdom would leave the European Union without a deal.

Sterling dropped by as much as 0.5 percent against the US dollar to $1.2919. The figure is its lowest recorded since September. It made the currency the biggest loser against a resurgent US dollar among the world’s major currencies.

Sterling also dropped by 0.4 percent against the euro to €1.1188. The said figure is also lowest recorded since the 23rd of July.

During an interview with the Sunday Times, Fox placed the odds of a no deal at “60-40.”  He added that “intransigence” from the European Commission is “pushing us towards no deal.”

A “No Deal Brexit” would imply that trade relationship between the United Kingdom and the European Union will default to the terms of the World Trade Organisation at the end of March 2019, when the official process of Brexit concludes, without a transitional period, which has intensified concerns of the worst-case cliff edge scenario that may be experienced in the City and beyond.

On Monday morning, Downing Street attempted to clarify the remarks of Fox.

A spokesperson from Downing Street stated: “We continue to believe that a deal is the most likely outcome because reaching a good deal is not only in the interests of the UK it is in the interests of the EU and its 27 members.

He added: “But the international trade secretary is right to say there is a risk of the negotiations not succeeding and the government has to prepare for all eventualities.”

Last Friday, Mark Carney, the governor of the Bank of England, said that the chances of a no deal on Brexit were “uncomfortably high. His remarks sent the pound below $1.30 for much of the day.

Proposals are now growing for the extension of the Article 50 process in the hope that a deal can be achieved with a few extra weeks.