(Bloomberg) --
The pound fell after U.K. Prime Minister Boris Johnson ratcheted up the chances of trade negotiations failing with the European Union.
Sterling declined as much as 0.6% against the dollar, extending its drop to the longest since June, as Johnson prepared to tell the EU he’s willing to let talks fail rather than compromise on what he sees as core Brexit principles.
Johnson Gambles on No-Deal as EU Talks Run Short of Time
Talks between the two sides are set to continue this week. The U.K currency had touched the highest this year last week amid broader weakness in the dollar.
Investors are refocusing on Brexit with the two sides accepting they need to reach a deal by October in order to pave the way for a smooth exit at the end of the year, when the Brexit transition period ends. A so-called cliff-edge departure could add to the economic strain on the U.K. from the coronavirus.
“It looks that we are only at the beginning of a painful correction lower in the pound,” said Valentin Marinov, head of Group-of-10 foreign-exchange strategy at Credit Agricole (OTC:CRARY) SA, who sees the pound dropping to $1.20 in the event of no deal.
The pound fell 0.5% to $1.3207 as of 7:42 a.m. in London. It slid 0.5% to 89.58 pence per euro.
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