The pound has weakened to its lowest level in six months against both the dollar and the euro, pressured by fears of a no-deal Brexit and mounting signs of a slowing economy.
The latest evidence of economic trouble came from a survey on Tuesday showing that sales at British retailers inched up at the slowest pace on record over the past year. A number of economists believe the economy contracted in the second quarter.
The pound fell to equal $1.25 and 1.11 euro, with both rates below earlier six-month lows. Against the dollar, sterling was within striking distance of an April 2017 low below $1.24. It very briefly hit that low in January this year in chaotic trading during a currency market flash crash.
Sterling’s losses have been compounded by a strengthening dollar after receding expectations of an imminent interest rate cut in the US.
Adam Cole, a strategist at RBC Capital Markets, noted that betting markets were now pricing in a 95 per cent chance of Boris Johnson becoming prime minister. Some investors worry Mr Johnson will push Britain towards an abrupt departure from the EU.
There is likely to be more pain in store for the pound. Han Tan, market analyst at FXTM, said the currency might fall further “should the prospect of a no-deal Brexit ramp up meaningfully over the coming months”.
Official data on UK economic output in May, due on Wednesday, will provide more clarity on whether the economy shrank in the second quarter after a series of disappointing business surveys.