Sterling falls by a cent against dollar after Tory leadership candidates’ backstop remarks

The pound has fallen to its lowest level in more than two years after pledges by both Boris Johnson and Jeremy Hunt to ditch a key part of the UK-EU withdrawal agreement intensified City fears over a no-deal Brexit.

Sterling fell by a cent against the US dollar after a Sun and Talkradio debate in which both the contenders to replace Theresa May in Downing Street said they would not accept a Northern Ireland backstop in its current form.

With Brussels insisting that an agreement to maintain a seamless border between Northern Ireland and the the Irish Republic is non-negotiable, investors at one point drove the pound below $1.24 – a level last seen in the spring of 2017. It later edged back above $1.24. The pound also hit a six-month low of €1.1063 against the euro.

The pound’s losses against the US currency intensified after a Sky News report that Johnson was considering sending MPs home during the days leading up to the Brexit deadline day of 31 October.

A weaker pound makes exports cheaper but pushes up inflation by making imports dearer. John McDonnell, the shadow chancellor, said: “The instability and uncertainty caused by the Conservative party leadership contest has real-world consequences.”

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