UKX FTSE 100 Index

By Steve Goldstein, MarketWatch

Sterling drops below $1.23 level and then makes a run toward $1.22

The British pound nosedived to a fresh two-year low on Monday as concerns about the country leaving the European Union without a deal intensified amid moves by Prime Minister Boris Johnson in his first few days in office.

The pound fell as low as $1.2212, from $1.2382 late Friday, as Johnson and his new Cabinet made clear they were stepping up preparations to leave the EU without a deal.

   The pound   also collapsed against the euro, fetching  EUR1.0979 vs. EUR1.1128. 

Selling intensified as New York traders started their day.

Johnson has declared that the withdrawal agreement negotiated between the EU and former Prime Minister Theresa May is "dead" unless the Irish border backstop is abolished. A Johnson spokeswoman was quoted as saying he wouldn't even meet EU leaders unless they agreed to change the withdrawal agreement.

Michael Gove, who is heading up the government's preparations for a no-deal Brexit, wrote in the Sunday Times that the government is working on the assumption of a no-deal Brexit (https://www.thetimes.co.uk/article/michael-gove-no-deal-is-a-very-real-prospect-we-must-ensure-we-are-ready-0flpkxkc3).

Analysts at Citi said: "If the aim is to call and win an election, early signs are that chances are improving, which reinforces our base case of an election later this year or in early 2020. However, the Boris Johnson government's honeymoon period with voters could be short-lived if the economy responds as negatively to the no-deal talk as sterling and a 5 percentage point lead over Labour is probably too narrow for comfort."

The Bank of England on Thursday is expected to drop from its statement explaining its interest-rate decision its expectation of "an ongoing tightening of monetary policy over the forecast period." No interest-rate change is expected.

Meanwhile the Confederation of British Industry said in a new report that neither the UK nor the EU were prepared for a no-deal Brexit (https://www.cbi.org.uk/media-centre/articles/neither-uk-nor-eu-ready-for-no-deal-contingency-planning-study-finds/).

(END) Dow Jones Newswires

July 29, 2019 11:24 ET (15:24 GMT)

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