The pound has tumbled against the US dollar to a new two-year low as currency traders reacted to the increased likelihood of Boris Johnson’s new government toughens its language on a no-deal Brexit.
The markets appear to have been spooked by cabinet minister Michael Gove stating that a “no-deal is now a very real prospect” and the government is “working on the assumption” of a no-deal Brexit.
Against other warnings from members of the new Prime Minister’s top team, the pound fell 0.57% against the dollar to 1.2313.
Against the euro it was down 0.54% to 1.1070 - although the eurozone is having its own problems, with recent manufacturing data showing the sector is shrinking.
Historically, the euro continues to trade at low levels compared to pre-referendum levels, but the predicted short term collapse some were expecting against the pound has not materialised.
But with the US economy performing strongly, the pound has suffered far more.
Since former PM Theresa May announced her resignation at the end of May to Monday, the pound has fallen 3.4%.
David Cheetham, chief market analyst at XTB, said: “Brexit continues to be the dominant theme with a noticeable harshening of the rhetoric in recent days raising concerns amongst traders.”
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.”
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.”