LONDON: Sterling edged back towards five-month lows on Wednesday after the top contender to replace Prime Minister Theresa May reaffirmed his desire to take Britain out of the European Union with or without an agreement.
Boris Johnson told the BBC he was "serious" about leading Britain out of the EU on the Oct. 31 deadline without a deal if the bloc refused to negotiate a new exit agreement. It has repeatedly said it is not willing to reopen negotiations.
"We are heading for a showdown - a no-deal Brexit; a general election; or a second referendum," said Derek Halpenny, European head of global markets research at MUFG Bank in London.
"The pound is set to come under renewed downward pressure over the coming weeks with no deal still very much under-priced."
Bank of England Governor Mark Carney said on Wednesday it would only cut its economic forecasts to reflect the risk of a no-deal Brexit if Britain's next prime minister makes leaving the European Union without a transition agreement his preferred policy.
Carney's comments to the British parliament's Treasury Committee did little to move sterling, however.
Against the dollar, the pound slipped 0.1pc lower at $1.2680, after reaching a five-month low of $1.2507 last week.
Versus the euro, the pound weakened to 89.72 pence.
The next Conservative Party leader will be elected by the end of July, leaving only a few months to try to renegotiate the Brexit withdrawal agreement.
CFTC data at the end of last week showed traders had cut "net sterling shorts" by $563 million, but remained heavily short the pound.
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