Johnson Refuels Pound's Record Slide With Talk of No-Deal Brexit
Pound Wins Relief From Record Losing Streak as May Finally Exits
(Bloomberg) -- The pound extended a record run of losses against the euro as the front-runner to become Britain’s next prime minister said the nation must prepare for a no-deal Brexit.
Sterling fell for a 15th session against the common currency Friday as Boris Johnson said he wanted a pragmatic Brexit by using no deal as a negotiating tactic. That ended a brief respite for the currency after Theresa May announced she would step down, as the comments reignited market fears that a hard-line Brexit candidate could replace her.
“Going forward in the pound, it’s not pretty over the next few weeks,” said Jordan Rochester, a currency strategist at Nomura International Plc. “All leadership hopefuls who stand a chance of winning will be backing a new negotiated Super Canada deal, or if not, hard Brexit.”
The pound fell 0.1% to 88.41 pence per euro by 3:00 p.m. in London, having dropped more than 3.5% since May 3. It held its ground against the dollar at $1.2664, looking set to be this month’s worst performer among its Group-of-10 peers.
Former Foreign Secretary Johnson has been joined by other pro-Brexit candidates in a leadership contest due after May steps down on June 7, including current Foreign Secretary Jeremy Hunt, former Brexit Secretary Dominic Raab and influential lawmaker Graham Brady. Johnson said he would go back to Brussels to try to renegotiate an unpopular Irish border agreement, and make clear that he’s prepared to leave without a deal if the European Union says no.
U.K. government bonds held their ground, with 10-year yields touching 0.95%, the lowest since 2017. As political uncertainty clouds the outlook, traders are also starting to bet the Bank of England may need to shift gear toward interest-rate cuts rather than hikes.
--With assistance from Anooja Debnath.
To contact the reporter on this story: Neil Chatterjee in London at nchatterjee1@bloomberg.net
To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Scott Hamilton, Anil Varma
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