Pound hits new two-year low as no-deal Brexit planning ramps up

Nigel Farage was beaming after the referendum result when the pound started plummeting. Photograph: TNE. - Credit: Archant

The pound has fallen against the US dollar to a new two-year low as markets reacted to Boris Johnson preparing to launch an advertising campaign promoting a no-deal Brexit.

Cabinet minister Michael Gove wrote in the Sunday Times that a “no-deal is now a very real prospect” and the government is “working on the assumption” of a no-deal Brexit.

New chancellor Sajid Javid said there would be extra funding for Border Force officers and a “war cabinet” has been created by Johnson to focus on Brexit and no-deal preparations.

And new foreign secretary Dominic Raab said the only way for a deal to be achieved will be if the EU changes its position.

In response to the news, the pound fell 0.57% against the dollar to 1.2313. Against the euro it was down 0.54% to 1.1070, and continues to trade at low levels compared to pre-referendum levels.

Since former PM Theresa May announced her resignation at the end of May, the pound has fallen 3.4%.

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Neil Wilson, chief market analyst at Markets.com, added: “The fresh push to the downside follows an escalation in no-deal risks. Specifically, the market has reacted to Michael Gove saying that the government is ‘working on the assumption’ of a no-deal Brexit.

“It increasingly looks like the Boris Johnson government is embarking on an overt policy of brinkmanship, specifically designed to take the Nigel Farage Brexit Party out of the equation ahead of a likely election this autumn, and ultimately with the aim of forcing the EU back to the negotiating table.”

Nigel Green, founder and CEO of financial advisory firm deVere Group, said the falling pound will have an impact on holidaymakers wherever they travel.

He explained: “The pound has been fallen against the euro every year since the referendum – it is now worth around 15% less than before the vote.

“It’s not just those visiting the eurozone who are in for a shock either. Overall, the pound is the worst-performing major currency in the last three months, meaning almost every destination is now more expensive than it was for Brits.”