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Sterling Hits 23 Month Low Overnight

The British pound holds above recent lows this morning although it remained vulnerable as traders still worry that Britain is headed for a no-deal Brexit.

Sterling hit a new 23-month low against the euro overnight, with the losses largely down to strength in the single currency rather than more Brexit-related worries.

The Guardian newspaper reported late on Monday that Brussels diplomats briefed after a meeting with British Prime Minister Boris Johnson’s chief European envoy said it was clear Johnson had no intention of renegotiating the withdrawal agreement.

Johnson has said Britain will leave the European Union on Oct. 31 with or without a deal.

The risk of a no-deal Brexit in October has surged in recent weeks under Johnson, hammering the pound to its lowest in more than two years.

However, a government source has said Britain is “ready and willing” to do a Brexit deal with the European Union.

“We want a deal. It’s sad that they don’t want to negotiate with us,” the source said on condition of anonymity.

“The fact that the Withdrawal Agreement has been rejected by large margins by the House of Commons on three occasions means that, if there’s going to be a deal, they have to be prepared to renegotiate. We’re ready and willing to do so.”

In the run-up to the Brexit deadline at end-October, we expect EUR/GBP to remain volatile and maybe more so than we previously thought likely. Financial markets are taking Boris Johnson’s direct approach literally and, in the run-up to October, this could mean the pound will weaken further, possibly below 1.05

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