No-deal Brexit chills send pound to a five-month low vs euro

Signs that arch-Brexiteer Boris Johnson may be a step nearer to becoming Britain’s next pm sent the pound tumbling to a five-month low in comparison to the euro as investors worried about the risks of a hard exit from the Eu.

The pound dived to 89.66 pence in comparison to the euro, its lowest level since mid-January, prior to the results of a second round of voting in the Tory leadership contest that might cement Johnson’s pole position among rivals.

“Fears of the disorderly exit could keep the path of least resistance to the downside,” said Charalambos Pissouros, senior market analyst at JFD Group.

The pound has weakened more than 6% against the euro since early May as investors have raised their bearish bets against the British currency on worries that Britain may crash out of the Eu with no deal on Oct. 31.

Though recent short bets have been trimmed somewhat, overall sentiment is becoming cautious on the pound, with recent optimistic talk in the Bank of England doing little to dispel the cloud of gloom hanging within the currency.

While policymakers have said that benchmark rates of interest might need to rise earlier than markets expect, traders have been in no hurry to shift their expectations, with futures markets pricing in no rate hikes well into late 2021.