Pound seen hitting 34-year low if Johnson drags UK to no-deal

Bloomberg

The pound will tumble to the lowest level since 1985 if the UK leaves the European Union without a deal, a prospect that looks more likely now than six months ago, according to a Bloomberg survey of analysts.
There is now a 30 percent chance that Britain will exit the bloc in October without a divorce agreement, the poll of 13 banks showed. That’s more than three times the level from a similar survey in February. Such an outcome would drive down sterling by more than 9 percent to $1.10, a level not seen in 34 years, according to the median response.
The latest survey also shows that with just under three months until the Brexit deadline, the possibilities remain open. Strategists assign equal probabilities to a no-deal exit, a further delay to the departure date as well as the prospect of a general election being called before October 31. A deal being struck by the deadline is seen as the least likely outcome with just a 15 percent chance. “It feels very much that the market is now fully on board with a hard Brexit risk rising and rising,” said Luke Hickmore, a money manager at Aberdeen Standard Investments.
Sterling tumbled nearly 10 percent during the week of Black Wednesday in September 1992, when the UK was forced to withdraw from the European exchange-rate mechanism.
The pound has slid almost 7 percent since the UK deferred the original end-March Brexit deadline, to about $1.2140, with investors pricing in higher odds of a disorderly Brexit after the ruling Conservative Party’s leadership contest ended with the election of Brexiteer Boris Johnson. A sterling slump to $1.10 in a no-deal scenario would mark a return to levels last seen during the dollar bull run of 1985.