Pound May Slump 10% on No-Deal Brexit

The pound just can’t get a breather.The pound just can’t get a breather.

The currency tumbled to $1.2920 Monday, the lowest level in 11 months, after U.K. International Trade Secretary Liam Fox said over the weekend that the likelihood of a no-deal outcome is as high as 60 percent. As Britain lurches closer to the March 2019 deadline for its official exit from the European Union, growing concern about a disorderly divorce has driven sterling down even after the Bank of England raised interest rates last week.

The pound could drop further by about 10 percent as markets grow increasingly jittery about U.K.-EU negotiations turning sour, according to analysts. Nine-month risk reversals in sterling-dollar, which cover Britain’s official departure date, are currently at the most bearish in 17 months, while implied volatility on the same tenor has jumped to the highest since March.