Pound falls to lowest levels in three weeks amid election speculation – UPDATED
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The pound fell to the lowest level in three weeks amid mounting speculation that a general election is imminent.
The pound has plunged below $1.20 for the first time in 32 months as traders brace for a chaotic week in British politics.
Analysts forecast a volatile week for the pound as parliament reconvenes following the summer break amid speculation of a snap general election and continued uncertainty over the UK’s exit from the EU.
Boris Johnson said on Monday he did not want to go to the country but the reaction of investors pointed to an expectation that a national poll will be the only way out of the Brexit standoff.
Sterling tumbled by almost a cent against the US dollar and sold off sharply against the euro as election rumours swirled around the City before the prime minister’s speech outside Downing Street.
Johnson said he wanted to push ahead with his domestic agenda and he plans to leave the EU with or without a deal on 31 October “without an election, which I don’t want and you don’t want”. However, sterling remained down as uncertainty lingered and a government source said the prime minister was considering an election on 14 October.
Weak economic data showing UK manufacturing output falling at the fastest rate in seven years in August put further pressure on the pound as the threat of a no-deal Brexit dragged down business activity across the country.
The pound fell by 0.8% against the US dollar early on Monday evening, sliding to $1.2060 against the American currency, and was down about 0.7% against the euro to trade just below €1.10.
Analysts said the pound could drop further as the uncertainty created by an election could further damage the economy or make a no-deal Brexit increasingly likely but said any surge in support for remain parties could cause sterling to rally.
