The pound has bounced after tumbling to a ten-year low against the euro this morning following a report from the Institute for Government (IfG) think tank that said MPs are unlikely to be able to stop a no-deal Brexit.
Sterling dropped to €1.072 shortly after midnight. It fell to its lowest point since the depths of the financial crisis 10 years ago after edging below the last low point of August 2017. It also fell to fresh two-year lows against the dollar.
The pound has since regained ground, however, and was up 0.6 per cent against the euro to €1.08 by 1pm UK time. It had risen 0.4 per cent against the dollar to $1.208.
The gloomy outlook for the pound has also caused traders to ramped up bets against the currency to the highest level since April 2017.
Traders looking to profit from sterling’s woes added 12,552 short positions – bets that the pound will sink further – in the week to 6 August, according to data from the US’s Commodity Futures Trading Commission (CTFC). This took the number of short positions to 107,406.
Sterling has fallen over 3.7 per cent against the dollar since Boris Johnson became prime minister on 24 July. He has ordered his government to ramp up no-deal preparations, splashing £2bn of extra funding on the cause.
Most investors fear a no-deal Brexit would be economically damaging. The UK’s official budget watchdog has said there would be a sharp depreciation in sterling.
Kit Juckes of Societe Generale said there was widespread “bearishness” against the pound. “The CFTC data confirm the bearish bias but it’s worth stressing that there is no good news on the horizon.”
“The last time we were down here, both positions and currency remained at extremes for over six months.”
Yet he said: “I still think EUR/GBP is heading to 0.95 but not parity.”