LONDON (Reuters) – The pound sank on Thursday amid concerns about the UK parliament’s vote on Brexit and after the Bank of England warned of risks to the currency if Britain leaves the European Union in a disorderedly manner.
Barely four months before Britain is due to leave the EU, Prime Minister Theresa May is struggling to garner support from parliament for the agreement she sealed with EU leaders on Sunday.
The possibility of a no-deal Brexit has sent the pound to a two-week low and currency analysts say a recovery is unlikely before next month’s parliament vote on May’s Brexit deal, a key risk event.
“It looks on paper like [parliament] is going to vote against the deal which will lead us into heightened uncertainty,” said Lee Hardman, an FX strategist at MUFG in London.
Hardman said that a resounding defeat in parliament would increase fears that Britain would struggle to pass future Brexit legislation going forward and that the pound could fall by as much as 4 percent.
Adding to the gloomy sentiment, the Bank of England warned on Tuesday that Britain risks a bigger hit to its economy than the financial crisis if it crashes out of the European Union without a deal.
In that scenario the pound could lose a quarter of its value, the Bank of England said.
At 0930 GMT, the pound was trading down 0.4 percent against the dollar at $1.2760 per dollar. It was down half a percent against the euro at 89.14 pence.
May stepped up her warnings about the risk of a disorderly Brexit on Thursday if the UK parliament votes against the agreement she has struck with the European Union.
“The timetable is such that actually some people would need to take some practical steps in relation to no deal if the parliament were to vote down the deal on the 11th of December,” May told a parliamentary committee.