LONDON (Reuters) – British pound GBP = collapsed on Tuesday as investors insisted Prime Minister Boris Johnson's brinkmanship on the European Union could lead to a messy divorce, the chaos in the global economy and financial markets would trigger.
FILE PHOTO: British Prime Minister Boris Johnson gestures during a speech on national priorities at the Science and Industry Museum in Manchester, UK, on July 27, 2019. Lorne Campbell / Pool over REUTERS
Sterling crashed through trade barriers and fell for one Intraday low of $ 1.2120 in shallower Asian trading overnight, the lowest level since March 2017. The pound has lost 3.6 cents since Johnson was named the new British Prime Minister a week ago.
Since the EU referendum in 2016, the pound has been dedicated to the rhetoric of the Brexit divorce: after the announcement of the result, it fell the largest one-day decline since the 1970s free-floating exchange rate era.
Since the vote in 2016, the pound sterling has lost 28 cents, one of the most significant currency losses in recent decades.
"We see another GBP weakness," said ING in a statement to clients. "The current British pound meltdown is consistent with our view that GBP risks are trending downwards amid uncertainty over Brexit and the increasing likelihood of early election (our base case)."
Johnson, who was greeted by US President Donald Trump as Britain's Great Britain has pledged to sign a new divorce treaty with the European Union and to boost the world's fifth largest economy after what he calls the drought of Prime Minister Theresa May.
When Johnson entered Downing Street on Wednesday, he pleaded with the EU for a showdown by promising to negotiate a new agreement, and threatened that on 31 October, he threatened Britain without an agreement to limit economic turmoil would turn off if the block refused.
He told reporters in Scotland Monday that he wanted to get a new deal, but the government must prepare for a Brexit without a deal.
When asked about his comment in the party leadership campaign that the odds of Brexit without a deal were a million to one, he said, "Provided there is sufficient goodwill and common sense on the part of our partners, that's right here I would take advantage of the opportunities. "
Many investors say a Brexit without agreement would send shockwaves through the global economy, driving the UK economy into recession, upsetting financial markets and weakening London's position as a prominent international financial center.
Proponents of Brexit say that while there would be some short-term difficulties, the disruption of a no-deal Brexit is overdone and that the United Kingdom would thrive in the long-term if it left the European Union.
Johnson's rise has put a declared Brexitee at the head of the British government for the first time since the EU Brexit referendum in 2016. Johnson will tell Welsh farmers Tuesday that they'll get a better deal after Brexit. This is part of a nationwide tour to support his promise to leave the European Union by 31 October.
"I will always support the big British farmers, and if we leave the EU, we need to make sure that Brexit works for them," Johnson said before his arrival in Wales.
"Once we leave the EU on the 31st of October, we will have a historic opportunity to introduce new systems to support agriculture – and we will see to it that farmers get a better deal. Brexit offers tremendous opportunities for our country, and it is time for us to look to the future with pride and optimism.
Writing by Guy Faulconbridge; Additional coverage by Andy Bruce, Elizabeth Piper and William James; Editing by Jon Boyle