Pound hits two year low against dollar

The pound has continued to drop in value as Boris Johnson’s government steps up preparations for a no-deal Brexit.

On Tuesday, the pound came to a two-year low against the US dollar, $1.2120, before mounting a slight recovery, while also dropping to a value of €1.0881 against the euro.

Johnson’s government now acknowledges a no-deal Brexit is a “very real prospect” and has refused to enter new negotiations with Europe until the controversial Irish backstop is removed from the withdrawal agreement.

The pound has seen a 2.4 per cent fall since Monday this week after a Downing Street statement revealed that talks with Europe over the backstop had stalled.

A spokesperson said that because the EU is not willing to renegotiate on the backstop at this stage, the government “must assume there will be a no-deal Brexit on October 31”.

Michael Gove, appointed Chancellor of the Duchy of Lancaster and responsible for preparing for no-deal, wrote in the Sunday Times that the government is “working on the assumption” that there will be no deal agreed with the EU.

However, the new prime minister himself has since said he would “hold out the hand” and “go the extra thousand miles” if it were to culminate in a new deal.

Seema Shah, a senior global investment strategist at Principal Global Investors, told the BBC that the pound could slide to $1.18 against the dollar or even lower if a no-deal Brexit occurs.

Shah did add, however, that there is a “widespread view that a no-deal Brexit will be stopped”, particularly with the fear that the pound could fall further with little certainty as to when this fall could be expected to stop.