‘Groundhog day’ for investors as pound sinks again over no-deal Brexit fears

Prime Minister Boris Johnson delivers his Unleashing Britain's Potential speech in the Painted Hall,

Prime Minister Boris Johnson delivers his Unleashing Britain's Potential speech in the Painted Hall, Old Royal Naval College Greenwich. Photograph: Frank Augstein/PA Wire. - Credit: PA

The pound has fallen more than 1% against the dollar as disputes over post-Brexit trade talks intensified following major speeches by Boris Johnson and the EU's chief negotiator Michel Barnier.

At midnight a pound was worth 1.318 dollars, but by midday on Monday it was down to 1.305 dollars - a fall of 1%.

The falls particularly hit from 10am onwards, as Barnier issued a warning over fishing access, and Boris Johnson said he would be willing to walk away from the year-long talks if the EU did not fall into line and agree to the UK's demands.

He said: "There is no need for a free trade agreement to involve accepting EU rules on competition policies, subsidies, social protection, the environment or anything similar, any more than the EU should be obliged to accept UK rules."

Investors are fearing that the transition period could end without a deal agreed between the UK and European Union.

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Neil Wilson, chief market analyst at Markets.com, said: "The way the two sides have come out, traders are starting to consider no-deal risks again.

"No deal is not the base case by any means but the EU and UK look in very different places right now at the start of talks.

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"It's going to be a very long and rocky road to get there and the shape of the deal will hinge on some important concessions on both sides.

"The British government has come out swinging over the weekend with plenty of fighting talk, but they're up against a tough opponent."

Ranko Berich, head of market analysis at Monex Europe, added: "Today's sterling price action has a feel of groundhog day: signs of tension in EU-UK trade negotiations have caused the pound to drop some 1% today.

"But on the whole, although Barnier and Johnson have indeed set out markedly different visions for trade relations, the UK prime minister was careful not to emphasise any of the sort of red lines that sunk his predecessor's negotiations with the EU."

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