The pound plunged to new lows Tuesday after lackluster U.K. data compounded growing fears of a haphazard Brexit outcome at the end of October.
Sterling versus the U.S. dollar weakened 0.7% Tuesday, reaching $1.2418 by late-morning London trade. It hit a 27-month low against the greenback and a new six-month low versus the euro. Against the single currency, the pound has also suffered 10 consecutive weeks of losses — the longest on record.
In a research note Tuesday, Nomura’s currency analyst Jordan Rochester called the fall in the pound’s spot price as “the story of the day” and said there was potentially more downside risk.
“I am worried that volume is starting from a very low base and hedging flows will be picking up further,” he said. Rochester said in a separate text on Monday that he expected a spike in volatility for the pound’s trade once lawmakers returned to the House of Commons in September after their summer breaks.
According to Reuters data the British pound has been the worst performing G-10 currency this year. Sterling’s recent trend of losses against its major trading partners has been attributed to the ongoing race to succeed Theresa May as the next Conservative Party leader and U.K. prime minister.
Previous London Mayor and former Foreign Secretary Boris Johnson is the favorite to defeat current Foreign Secretary Jeremy Hunt in the runoff.
In their pitches to Conservative Party members, both men have taken a hard-line stance on future negotiations with the European Union, suggesting that they are prepared to walk away without a deal on October 31.
In a television debate Monday, each declared that the Northern Ireland “backstop” was “dead,” as it could trap the U.K. into a never-ending customs union with the EU.