The pound’s slide in value continued against the dollar and the euro on Tuesday morning, sinking further as traders bet on increased risks of a no-deal Brexit.
The UK currency is now on track for its worst month since October 2016, down 4.3% in July so far.
Sterling appears to be the most volatile currency of any G10 country, with Bloomberg reporting the cost of three-month insurance against fluctuations now at the highest in the group of major economies.
It remains at its lowest in 28 months after diving on Monday as Michael Gove, the UK government minister in charge of no-deal Brexit planning, said Britain had to work on the assumption no agreement would be reached.
New UK prime minister Boris Johnson, who has ordered officials to escalate preparations for a radical rupture from the EU without a deal, also said on Monday the withdrawal agreement previously reached with Brussels was “dead.”
The pound was down 0.3% against the dollar at around midday in London on Tuesday, and around 0.4% against the euro.
Sterling reached a low of $1.21 in early trading before recovering to $1.22, while it was trading at €1.09 against the eurozone currency. It is its lowest level against the dollar since March 2017.
The pound had been at $1.50 on the day of the EU referendum in 2016, and was trading at $1.70 five years ago.
Sterling’s decline against many global currencies in recent months and its acceleration in recent weeks comes at an unfortunate time for holidaymakers.
The fall in value means tourists receive less foreign currency for every pound they convert when travelling abroad, pushing up the cost of travel.
“It’s a real grim time to look at holidays and obviously we’re coming right into the holiday season,” Phil McHugh, a trader at Currencies Direct Ltd, told Bloomberg last week.
“We saw high levels back in March this year, it would have been great if people had the foresight to buy their holiday money then. I know I didn’t and I’m going away in a couple of weeks.”
A no-deal Brexit is seen as increasingly likely despite many warnings it could send shockwaves rippling through the UK economy, with Johnson and the EU showing few signs of willingness to compromise to secure a deal.
Britain’s budget watchdog warned earlier in July a no-deal Brexit would plunge Britain into recession, with unemployment, import prices, government borrowing and trade barriers soaring while real incomes, foreign investment, house prices and the pound crash.
Michael Brown, senior analyst at Caxton FX, said: “Sterling has fallen by more than 1% today, the biggest drop since mid-March, as markets continue to express concern over the increasing chances of a no-deal Brexit.
“Comments from the government that UK-EU talks will not take place before the Irish backstop is dropped, combined with the EU maintaining that the withdrawal agreement is not up for renegotiation, continue to exert downward pressure on the pound.”