LONDON: The British pound edged lower on Friday, weighed down by European Commission President Jean-Claude Juncker telling new British Prime Boris Johnson that a deal agreed forged by his predecessor was the best and the only Brexit agreement.
Juncker told Johnson on Thursday that the European Union (EU) would analyse any ideas put forward by Britain, provided they were compatible with the withdrawal agreement.
Johnson this week has repeated his pledge to renegotiate the withdrawal agreement and promise to take Britain out of the EU on October 31 with or without a deal. He has also said the so-called Northern Irish backstop must be abolished to avoid a no-deal Brexit.
The backstop requires Britain to adopt some EU rules unless a future arrangement is found to keep open the land border between Northern Ireland and Ireland. The now-invisible frontier between the British province and EU member Ireland is Britain’s only land border with the bloc.
Concerns that Britain under Johnson is headed for a no-deal Brexit have sent sterling plummeting, although its moves this week have been minimal after investors rushed to price in a government under the eurosceptic face of the 2016 Brexit campaign in the run-up to his taking over.
“The Brexit impasse has already reared its ugly head, just days into Boris Johnson’s tenure as UK prime minister […] The deadlock appears to solidify market concerns over the prospects of a no-deal Brexit, keeping the Pound rooted around the $1.24 mark against the US dollar,” said Han Tan, analyst at FXTM.
Sterling slipped 0.1 per cent to $1.2437, below its weekly high of $1.2522. The pound hit a 27-month low of $1.2382 last week as fears of a no-deal Brexit jumped.
Banks say the pound could drop to as low as $1.00 in the event of a sudden, disorderly exit from the EU, Britain’s biggest trading partner. Against the euro, the pound was little changed at 89.53 pence per.
The Bank of England gives its monetary policy decision next Thursday. Few economists expect the bank to change rates from the current 0.75pc but the focus will be on policymakers’ assessment of the current economic slowdown in Britain and whether it justifies a rate cut down the line. Money markets are pricing in a 25 basis point cut by June 2020.