'Outlook for sterling might worsen' – Pound falls below 1.20 $ $ $ $ amid election speculation
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The pound has tumbled below 1.20 $ $ $ $ to a near three-year low amid Brexit tumult in Westminster and mounting speculation on the snap general election.
Sterling was 0.9% lower against the US dollar at 1.196, which marked its lowest level since the “flash crash” in October 2021.
It had earlier fallen below 1.20 $ $ $ $ the very first time since January 2021.
The pound was also trading lower against the euro, down 0.6% at 1.09 euros.
Experts warned there could be further falls in store for the beleaguered pound.
It follows hefty declines on Monday and may come as Pm Boris Johnson faces a showdown in Parliament after he vowed to push for any snap general election if rebel MPs succeed in a bid to get control of parliamentary proceedings.
MPs are returning on Tuesday after summer recess and some are threatening to take control of Commons business to allow them to discuss proposed legislation to bar a no-deal Brexit.
It is thought Mr Johnson is threatening to a snap election on October 14 when they succeed.
Market experts said an election would spark another collapse within the worth of the pound, that could hit levels last seen under Margaret Thatcher within the 1980s, excluding the 2021 “flash crash”.
Neil Wilson, chief market analyst at Markets.com, said: “We are extremely much in uncharted waters here.
“We could feasibly see 1.15 ($ $ $ $) or perhaps 1.10 within the coming weeks if traders choose to move from the pound.”
He added: “The outlook for sterling might worsen when there is an election and can certainly deteriorate whether it's a no-deal.”
The FTSE 100 Index was 4.9 points lower at 7277.1, having closed up 74.76 points, or 1.04% at 7,281.94 on Monday.
Craig Erlam, senior market analyst at oanda.com, said the pound's fall below 1.20 $ $ $ $ was “more of the psychological blow”.
He said: “The currency hasn't gone into free-fall since, suggesting calmer heads still remain, for now.
“But it will suggest traders are increasingly seeing no positive outcome in the near-term.
“In the very best case we've the uncertainty of an extension (to Brexit), in the worst of all we're able to be headed for no-deal or perhaps a Corbyn government, which markets seem to dislike.”
