Pound could hit 35-year low if no-deal Brexit looks certain

The pound could hit a 35-year low against the dollar as fears grow over the prime minister suspending parliament and a no-deal Brexit mount.

Traders have reacted on Wednesday to Boris Johnson’s plans to prorogue parliament for five weeks until 14 October when the UK could see a “Queen’s Speech.”

The news of a no-deal Brexit saw the pound lose 0.7% against the US dollar to $1.221.

Panmure Gordon chief economist Simon French said, “it would be wrong to think that today’s moves are fully factoring in a no-deal outcome.”

If a no-deal Brexit looks certain then “we could see sterling trading down towards its all-time low of 1.08 versus the USD, a level hit 34-years ago.”

Rupert Thompson, head of research at investment firm Kingswood said, “Today’s slide merely takes the pound back down to $1.22 from the high of $1.23 earlier in the week and leaves it comfortably off the low of $1.20 touched earlier this month.”

Craig Erlan, UK senior market analyst at Oanda, said, “The pound is in freefall this morning after plans emerged to prorogue Parliament and prevent MPs from passing legislation to prevent no-deal.

“Either way, it certainly caught markets off-guard and came at a time when the pound had been recouping some of its losses.

“The FTSE, as ever, is the unintended beneficiary of the plunge in the currency, given that the vast majority of its earnings are generated outside of the UK.”

Viraj Patel, FX and global macro strategist at investment startup Arkera said, “The message to the UK government from sterling markets is clear: any steps that take the UK out of the EU without a deal on 31 October will result in a sharp sell-off in the currency.”

Analysts at investment management firm Brooks MacDonald said, “Sterling’s reaction has been for a sharp fall versus both the dollar and euro from already suppressed levels.

“Domestic focused UK stocks have under-performed international peers as the heightened risk of a no-deal secession begins to be priced into markets.

“With the outcome of Brexit remaining volatile and unclear, sterling will remain under pressure and trade within a range that reflects the dual possibilities of a deal and a disruptive exit.”

Hmm #sterling is not taking this news well #prorogue pic.twitter.com/24kKVxUCde

— Anna Macdonald (@AnnaMacdWilson) August 28, 2019