Sterling fell to a five-week low as British foreign secretary Boris Johnson boosted concern that Britain is heading for a swift exit from the EU.
The currency weakened versus all of its 16 major peers after Johnson told Sky News yesterday that the Britain plans to trigger the Article 50 process in early 2017 and suggested the country’s exit from the bloc could take less than two years.
The timeframe is the clearest yet given in public by a member of Prime Minister Theresa May’s government, which previously limited itself to saying Britain wouldn’t invoke Article 50 of the Lisbon Treaty this year.
The timing of Britain’s exit has become a focal point for investors trying to gauge the longer-term implications of the referendum, with accelerated negotiations likely to stoke more short-term volatility in the currency.
Sterling is already down about 13 per cent against the dollar since Britain voted to quit the EU in June, and is the worst-performing major currency in 2016.
“You can put it down to a political uncertainty surrounding Brexit”, said Neil Jones, head of hedge fund sales at Mizuho Bank Ltd in London.
“Currencies are notoriously sold off whenever there’s an element of uncertainty, almost regardless of what the uncertainty is related to.
He went on: "This hard Brexit or soft Brexit or no Brexit, that unknown quantity is why sterling is being sold.”
Sterling fell one percent to this afternoon, reaching its lowest point since the middle of August. Sterling weakened 1.1 per cent to 86.66 pence per euro.