Sterling fell to a new 5-month low on Friday as investors continued to fret about the possibility of a no-deal Brexit should Boris Johnson win the Conservative party leadership race and replace Prime Minister Theresa May as prime minister.
Against the euro the British currency fell 0.2% to 89.92 pence, its weakest level since Jan. 11. Sterling has now lost 5% of its value versus the single currency since the start of May, although losses during the last week have partly come as a result of broad euro strength.
Versus the dollar, the pound was steady on Friday at $1.2670 but down 0.6% for the week.
Investors have been reluctant to take big positions in the pound amid the Conservative party leadership contest, which should end with a new prime minister in place by the end of July.
Johnson, the frontrunner, has said Britain will leave the European Union on Oct. 31 deal or no-deal, but he has also said there is only a one in a million chance of leaving without an agreement in place.
"It is going to be a bumpy ride. GBP looks a bit more cheap. But the fact that it is cheap and unloved means there is a risk we see a slightly stronger GBP. We could potentially see a stronger reaction if more market friendly news are delivered," said Joseph Little, global chief strategist at HSBC Global Asset Management.
Sterling was unmoved by GDP data released on Friday, which showed the British economy grew 0.5% in the first quarter, in line with expectations.
Some say that the pound is likely to remain under pressure until there is clarity around Brexit.
"As long as a no-deal Brexit remains a possibility, that should keep the pound below the psychological 1.30 mark against the U.S. dollar," said Han Tan, market analyst at FXTM.
"Even though the UK leadership transition is set to be completed within the next month, sterling is expected to remain exposed to political risks leading up to the Oct. 31 Brexit deadline, as the UK continues to pursue its exit from the European Union." (Reuters)