Monday morning was bad news for the United Kingdom and the European Union as the sterling hit a two-year low against the undisputed U.S. dollar. The pound also saw a decline as British ministers held talks over the weekend regarding a no-deal Brexit.
According to The Guardian, sterling went as low as a buying of only $1.2358 in early Monday trading. The British pound followed suit, weakening by 0.12 percent against both the euro and the U.S. dollar.
Senior cabinet ministers reportedly said on Sunday that the British Parliament was preparing to crash out of the EU without a deal, sending markets and the sterling into a frenzy.
Prime Minister Boris Johnson's new cabinet Brexit negotiator, Michael Gove, said that the government was now "operating on the assumption" that the U.K. would have to walk out of the bloc without an agreement.
Debt rating agency Creditsights analyst Fernando Barajas suggested that the EU may no longer be willing to implement any changes to the existing deal that has been repeatedly rejected by both sides. He added that despite the no-deal indications from the U.K., the bloc have shown "little sign" it will change its mind regarding the existing proposed deal.
Following reports that the British government is now bracing itself for a no-deal Brexit, sources from the Treasury revealed that they are expecting more than $1 billion in additional funding solely for a potential no-deal, BBC News reported.
True enough, Chancellor Sajid Javid revealed on Sunday that there is a possibility the government will set aside funds for the improvement of infrastructure in relevant U.K. ports.
Javid noted that while everyone is "optimistic about the future," they are also being realistic about the other potential scenarios to protect the U.K. economy. If the no-deal Brexit becomes the default for the situation, Britain would have to cut its EU ties immediately.
Other British lawmakers are still fighting a no-deal Brexit. These include Labor leader Jeremy Corbyn, who said he would do everything in his power to stop the U.K. from leaving the EU without an agreement.
Amid the ongoing division within the British government, a new study suggested that both the EU and the U.K. are actually not prepared for a no-deal scenario. The Confederation of British Industry (CBI) said in a Sunday report that "no one is ready," Bloomberg reported.
The CBI report further noted that the EU side is more or less unprepared for a scenario wherein the U.K. crashes out without a deal. At this point, most experts believe "no deal" is now more likely than ever, even before former Prime Minister Theresa May's deal was first rejected by the U.K. parliament.
