The pound headed for its worst run of losses in almost three years after UK Prime Minister Boris Johnson raised the stakes over a no-deal Brexit, issuing an ultimatum to the European Union that he won’t start divorce talks unless the withdrawal agreement is reopened.
The pound has slumped almost 3 percent in the past four days with investors increasingly pricing a higher chance of the UK crashing out of the bloc on October 31. Johnson has stepped up preparations for no-deal as the differences between the two sides grow.
“The biggest threat to GBP for the remainder of this year is the risk of [an accidental] no-deal Brexit,” wrote Credit Agricole SA strategists led by Valentin Marinov in a note to clients. “We continue to estimate a long-term fair value for GBP/USD that is consistent with a disruptive Brexit outcome of around 1.20.”