The pound slid as Prime Minister Boris Johnson sought to suspend the U.K.’s Parliament, raising the risk of a no-deal Brexit.
Sterling was the worst performer among major currencies as Johnson confirmed an earlier BBC report, while U.K. government bonds rallied on expectations of an earlier Bank of England interest-rate cut. With the U.K. set to leave the European Union on Oct. 31, suspending Parliament would mean less time for lawmakers to attempt to block a no-deal.
A no-deal Brexit is the worst-case scenario for the pound, driving it down to $1.10
The pound fell as much as 1.1%, the most in a month, before paring the drop to be 0.7% lower at $1.2206. It weakened 0.7% to 90.85 pence per euro. The yield on U.K. 10-year government bonds fell four basis points to 0.46%, as money markets brought forward expectations of a U.K. rate cut to March from May.
Parliament is due to return from a summer break on Sept. 3. Johnson said he’ll ask Queen Elizabeth II to suspend Parliament from the week of Sept. 9 to Oct. 14.
“We expect euro-sterling to re-test the 0.9300 level in coming weeks, even going towards 0.95 if the stand off between PM Johnson and the U.K. parliament and the EU intensifies,” Experts said.