Economy

Sterling under pressure again as UK steps up plan for ‘no-deal’ Brexit

Pound trades at 90.18p against euro as markets digest uncertainty at heart of process

Thu Aug 23 2018 - 16:31

Sterling slid on Thursday as the government stepped up its plans for a no-deal Brexit, once again reviving concerns about the currency's fate if Britain left the European Union without having agreed new trade arrangements.

Expectations Britain could soon be fending for itself without any agreement with the European Union, its biggest trading partner, are punishing the pound. With little more than seven months until it leaves the EU on March 29th, Britain has yet to reach an agreement with the bloc on the terms of its departure.

British companies trading with the European Union will face a tangle of red tape and possible delays at the border if the government fails to negotiate an exit deal, official papers showed on Thursday. The series of notes advising people and businesses how to protect themselves from the potential disruption of a 'no-deal' Brexit including stockpiling drugs. "The pound has already priced an increased risk of a no-deal Brexit but obviously there is both distance to travel in the negotiations and therefore additional moves in sterling are all but assured," said WorldFirst head of FX strategy Jeremy Cook.

Earlier the pound traded down 0.4 per cent down against the euro at 90.18p and 0.6 per cent down against the dollar at $1.2834. Sterling plunged to $1.2662 last week, its lowest since June 2017, after several ministers warned that the risk of leaving without an agreement had increased.

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Analysts at Rabobank said the pound would gain ground against the euro and rise to 87 pence per euro by November if a trade deal between the EU and Britain by then appeared likely.

Many economists say failure to agree exit terms would seriously damage the world’s fifth-largest economy as trade with the bloc would be subject to tariffs and regulatory barriers. Supporters of Brexit say there may be some short-term pain for the economy, but that long-term it will prosper when cut free from the EU. - Reuters

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