Sterling was slightly weaker on Tuesday as the risk of Britain crashing out of the European Union without a divorce deal on Oct. 31 remained elevated after Prime Minister Boris Johnson said he will take the country out of the bloc on deadline.
Even though the British parliament approved a legislature which forces Johnson to request a deadline extension from Brussels if he cannot agree on a deal with the EU by mid-October, the prime minister said he would not do such a thing.
Johnson's senior adviser Dominic Cummings said the United Kingdom will leave the EU on time and reporters should get outside London and speak to people who are not "rich Remainers."
"The market is extremely cautious because of Johnson's stance," said Jane Foley, Rabobank's senior currency strategist. "Anxiety is hanging over markets."
The pound enjoyed a relief rally on Monday after better-than-expected economic data eased investor worries about a technical recession in Britain, and after Goldman Sachs cut its expectations for a no-deal Brexit.
But "whilst there has been a relief rally in sterling, the market is going to be quite nervous until more clarity emerges" on what sort of relationship Britain is going to have with Europe after it exists the EU, said Foley, adding "it will be quite some time until uncertainty clears."
Sterling was down by 0.1% at $1.2329, having jumped to a six-week high the day before. Against the euro, the pound was steady at 89.525 pence.
Average British earnings except bonuses rose 3.8% in July, as expected. That was slightly weaker growth than in the previous month, when they rose by 3.9%, but the data did not have an impact on the pound. (Reuters)