Sterling 20 pound banknotes pass through an automated currency counting machine (Photographer: Matthew Lloyd/Bloomberg)

Pound Falls to Lowest Since October Versus Euro on No-Deal Fear

(Bloomberg) -- The pound fell to the lowest level in more than nine months against the euro amid growing concern that the U.K. could end up leaving the European Union with no agreement for future economic ties.

Pound Falls to Lowest Since October Versus Euro on No-Deal Fear

Sterling dropped for the third day versus Europe’s common currency and weakened against all of its Group-of-10 peers. U.K. International Trade Secretary Liam Fox said over the weekend that the risk of a no-deal Brexit had increased to as much as 60 percent.

Technical analysis here: Euro-Pound Charts Offer Something for Both Bulls and Bears

The pound’s weakness versus the euro “is a clear sign that markets are starting to focus on the pound-specific risks associated with a no-deal Brexit,” said Viraj Patel, a currency strategist at ING Groep NV. “We’ve penciled in a 0.91-0.92 high over the coming months to reflect peak no-deal Brexit uncertainty.”

Investors have turned more bearish on the U.K. currency as the Brexit deadline approaches, with the latest data from the Commodity Futures Trading Commission showing that both leveraged funds and asset managers continued to increase short positions.

“Right now we’re short of any meaningful news flow and uncertainty is high -- that’s not a good thing,” said Jordan Rochester, an analyst at Nomura International Plc. “Whilst this Brexit hedging continues to take place and the data are yet to turn materially higher to warrant an early hike from the Bank of England, the pound will be on the back foot and head lower.”

The British currency fell as much as 0.6 percent to 90.17 pence per euro, the weakest level since Oct. 20. Against the dollar, it dropped by as much to $1.2860, an eleven-month low. The yield on benchmark 10-year government bonds declined one basis point to 1.31 percent.

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