The pound has continued to slide reaching a two-year low on Wednesday, as investors now assess there is an increased likelihood of the UK crashing out of the European Union without a transition agreement in place.
In 2019, the pound is the G10 worse performing currency.
Soon after the referendum, in October 2016, the British currency dropped to $1.15, its lowest in three decades, rebounding to $1.34 in the first quarter of 2019.
But as both aspirant successors to Theresa May vow to drop the Irish backstop and leave the EU with or without a deal on October 31sr, the pound is sliding.
On Wednesday, the pound was trading at $1.2398, the lowest exchange rate since April 2017. It is now assumed that “no-deal” would push the pound to $1.10, that is, below the level of October 2016.
The pound was sliding against the dollar, even on a bad day for the US currency. Since late June, the dollar has strengthened in response to better-than-expected data on U.S. jobs, inflation and retail sales. Still, the Federal Reserve has signalled a rate decrease to counter the risk from global trade tensions and sluggish inflation. The International Monetary Fund said on Wednesday that the greenback was overvalued by 6% to 12%.
In the meantime, the political risk for the British economy is increasing. The EU’s chief Brexit negotiator, Michel Barnier, told the BBC on Thursday that Brussels has “never been impressed” by the threat of a no deal Brexit and waving this possibility as a threat is counterproductive.