The pound has fallen sharply against the dollar as markets react to the growing chances of a no-deal Brexit, with increasingly pessimistic noises coming from the UK and EU.
Prime Minister Boris Johnson yesterday said there was a “strong possibility” the two sides would fail to reach a deal.
Ursula von der Leyen, president of the European Commission, today said in a press conference that the new deadline for talks was Sunday. She reportedly told EU leaders that no deal was now more likely than a trade agreement.
The pound shed 0.8 per cent against the dollar, trimming earlier losses to stand at $1.319. It also fell 0.6 per cent against the euro to €1.088.
The FTSE 100 was 0.6 per cent lower despite the fall in the pound, which usually helps the stock index. The FTSE 250 of slightly smaller, more domestically focused firms was off by 0.7 per cent.
No deal the ‘worst possible outcome’ for markets
“With a no-deal departure from the EU now arguably odds-on, the UK is heading for the worst possible outcome at the worst possible time,” said Ayush Ansal, chief investment officer at hedge fund Crimson Black Capital.
“The UK economy, as seen this week, was flailing even before November’s circuit-breaker lockdowns. And the unrelenting pressure on the pound says all you need to know about what the markets think.”
However, Fawad Razaqzada of Think Markets was among the analysts to say that he thought a deal would still be struck.
“Brexit talks are going to the wire and I wouldn’t be surprised if the deadline is pushed further out [than Sunday], as after all this is what has been happening repeatedly in recent years.
“Ultimately, a deal is in the favour of both sides and I still think that they will make a last-minute compromise. Still, whatever probability of a deal was at the back end of last week, this has now reduced sharply and is reflected by a weaker pound.”