Pound Slides Below $1.20 After Boris Johnson Threaten Snap Election
The pound slumped to a level not seen in more than two-and-a-half years after U.K. Prime Minister Boris Johnson vowed to call a snap election if he lost a crucial vote in parliament on Tuesday evening.
Sterling fell below $1.20, a level not tested since January 2017, after Johnson said he would trigger a general election on Oct. 14 if lawmakers pass legislation later Tuesday forcing him to delay Brexit again in the event of a no-deal.
U.K. lawmakers are planning legislation to force Johnson to delay Brexit until Jan. 31 unless he can strike a deal with the European Union by mid-October. The prospect of a fresh election means investors are starting to price in the formation of an alliance containing parties in favor of crashing out of the European Union, according to Credit Agricole SA.
A “no-deal” Brexit is widely seen as a “cliff-edge” scenario to be avoided at all costs, resulting in Britain leaving the bloc with no transition period for legal and trading arrangements. Such an event is expected to cause food and medicine shortages along with significant border and travel disruption, according to the government’s own contingency plans.