The pound fell against both the dollar and the euro after Prime Minister Boris Johnson told the EU that the Irish backstop is “anti-democratic”.
In a letter to European Council President Donald Tusk, the PM said the backstop must be scrapped which led to the pound falling 0.31% against the dollar to $1.2090. It dropped 0.33% on the euro to €1.0911.
It comes ahead of Johnson meeting with German Chancellor Angela Merkel tomorrow and France’s President Emmanuel Macron on Thursday before world leaders gather at the G7 summit in Biarritz at the weekend.
Elsa Lignos, analyst at RBS Capital Markets, forecasts that sterling could recover.
“We are tactically long [on] GBP in our trade of the week as we feel there is some short term risk of a bounce if this week’s talks are not as bad as feared,” she said.