Pound Sinks Below $1.24 Due To A ‘Perfect Storm’

Sterling plunged briefly below $1.24 for the first time in 27 months on Tuesday and also hit six-month troughs against the euro as the two candidates to be Britain’s next prime minister vied to outgun each other on taking a harder Brexit stance.

Their positions appear to be leading markets to price a sharply higher risk of Britain leaving the European Union on October 31 without any transition trading agreements in place.

That would potentially force the Bank of England to cut interest rates to stave off an economic catastrophe.

The pound suffered its biggest one-day fall since March after Boris Johnson and his rival to be Conservative Party leader, Jeremy Hunt, said late on Monday they would not accept the so-called Northern Irish backstop element of Theresa May’s Brexit deal.

Both are trying to appeal to the majority of the Conservative Party members who want to make a clean break with the EU.

Johnson further stoked no-deal Brexit fears by vowing to send British lawmakers home for up to two weeks in October if he becomes prime minister. GBP weakness was also exacerbated by a bounce in the dollar following strong U.S. retail sales data. A move like that could prevent them stopping a no-deal Brexit. Bearing in mind The House Of Commons Law markers previously discussed a ‘ No Deal’ Woulf NEVER get through Parliament and amny would resign and join other parties and pushing for a vote of ‘no confidence’ in the existing government.

The British currency weakened 0.9% on Tuesday to $1.2409 , having plunged earlier to $1.2396, the lowest since April 2017 and below the “flash crash” of $1.2409 on Jan. 3.