The pound is heading for its worst month for nearly three years as it continues to tumble amid mounting fears over Boris Johnson’s hard-line stance on Brexit negotiations.
Sterling was 0.5% lower against the US dollar at 1.216, having fallen as low as 1.212 at one stage, with markets concerned that the new Prime Minister’s tough talking will put the UK on course for a cliff-edge Brexit.
The pound was also 0.5% lower against the euro at 1.09.
It comes after the pound fell 1% on Monday to its lowest level since March 2017.
Experts said sterling was now on track for its worst month since October 2016, having tumbled more than 4% since the end of June.
It spells bad news for British holidaymakers heading abroad, with the Brexit-hit pound leading to rock-bottom exchange rates.
Fiona Cincotta, senior market analyst at www.cityindex.co.uk, said: “Investors’ main concern remains a hard no-deal Brexit which has the potential to pull the economy into chaos.
“Boris Johnson’s new Cabinet did little to alleviate those fears, taking a hard line with Europe on forthcoming negotiations.”
The Government sparked concerns over its intentions on Monday after Cabinet minister Michael Gove wrote in the Sunday Times that a “no-deal is now a very real prospect” and the Government is “working on the assumption” of a no-deal Brexit.
Mr Johnson has since insisted he will “go the extra thousand miles” to secure a deal, but financial markets remain jittery.
“The weakness in the pound is a reflection of the fact that Boris Johnson’s plan is working. He wants his no-deal threats to be taken seriously by the EU in the hope that it forces them to re-engage on the backstop; clearly he has traders convinced.”
He added: “It now remains to be seen whether the EU will take his threats as seriously as the market is.
“Traders are currently not optimistic but it’s still early days. For now, the currency may remain under severe pressure.”