The value of the pound plummeted to a 28-month low against the US dollar following further assurances from Tory leadership candidates Boris Johnson and Jeremy Hunt they would ditch the controversial Irish backstop – a mechanism aimed to prevent a hard border in Ireland. On Tuesday, traders saw the pound fall by 0.94 percent to $1.2396 – the first time Sterling has dipped below $1.24 since March 2017. The economic uncertainly also sent shockwaves through Europe after the pound fell to a six month low against the euro. Sterling fell by 0.38 percent to €1.107 against Europe’s single currency.
Economic experts state the downturn in the pound was triggered by the hardening stance on Brexit by both Tory leadership candidates as the contest reaches its climax.
Vasileios Gkionakis, global head of forex strategy at Lombard Odier, said the battle between Mr Johnson and Mr Hunt “has transformed into an arms race of who is a bigger Brexiteer”.
Craig Erlam, senior market analyst at foreign exchange company, Oanda, said: “Traders are finding it hard to look past no deal risks or at the very least a delay and hard Brexit.”
Meanwhile Shadow Chancellor, John McDonnell, also attributed the decline to both candidates willingness the leave the bloc without an agreement on October 31.
Mr McDonnell said: “The instability and uncertainty caused by the Conservative Party leadership contest has real world consequences.
“The commitment of both contenders to a no-deal Brexit makes it even more important the Government put an end to playing games with people’s livelihoods and call a general election now.”
Markets were also troubled after it emerged Mr Johnson – who is favourite to win the leadership contest next Tuesday, is considering plans to prorogue Parliament in order to railroad a no deal exit from the bloc.
The former Mayor of London has repeatedly made a “do or die” pledge to leave the EU on Halloween “come what May”.
However Sky News revealed Mr Johnson is weighing-up moving the Queen’s speech to parliament to early November.
The proposal would see MPs not sitting in Parliament during the crucial weeks before the deadline.
Mr Johnson has so far refused to rule out the option, with a source close his campaign stating they are “discussing everything as an option”.