The pound is hovering around its lowest value in two years against the dollar as hopes fade of a Brexit deal.
Sterling was trading 0.2% at $1.21 (GBPUSD=X) on Wednesday morning, with most analysts expecting the decline to continue over the next few months as the planned exit date of 31 October gets closer and as rhetoric between the UK government and the EU grows increasingly hostile.
The pound dipped against the euro in early trading before recovering slightly, down 0.1% at around 11.30am in London.
New UK prime minister Boris Johnson and members of his cabinet have said repeatedly since he took office that Britain will leave by the deadline, “no ifs, no buts.”
Markets are alarmed it will send shockwaves through the economy if Britain abruptly cuts ties with its closest trading partner overnight.
Britain’s budget watchdog warned in July a no-deal Brexit would plunge Britain into recession, with spiralling unemployment, import prices, government debt, and trade barriers while real incomes, foreign investment, and house prices tumble.
Michael Gove, the minister responsible for no-deal Brexit planning, said on Tuesday it was “wrong” for the EU to be reportedly unwilling to continue talks.
But the UK has also set down red lines for talks including negotiation over the backstop, which could keep Britain close to the EU to prevent a controversial hard border between Ireland and Northern Ireland.
With Ireland a member of the EU, Brussels has repeatedly insisted on the insurance policy and the UK government previously agreed to it after lengthy talks and a deal signed under former prime minister Theresa May.
The government has said it is significantly ramping up no-deal preparations, with senior Johnson advisor Dominic Cummings claiming planning was going “great” despite scepticism about UK preparedness with just three months to go.