Traders work on the floor of the New York Stock Exchange (NYSE) at the opening bell on July 29, 2019 in New York City. Image Credit: AFP

London: The pound slid to its lowest level in more than two years and gilts rallied as UK Prime Minister Boris Johnson stepped up preparations for a no-deal Brexit with just about three months left until the nation exits the European Union.

Sterling fell against all of its Group-of-10 peers as various members of Johnson’s top team took a tough stance, with Chancellor Sajid Javid saying he was stepping up Treasury preparations for a no-deal departure and top aide Michael Gove writing in the Sunday Times that the government was now “working on the assumption” the talks with the EU would fail.

“The pound is back on the defensive after a short-lived relief rally following the appointment of Boris Johnson as the new prime minister,” said Lee Hardman, a currency analyst at MUFG. “The promotion of hard Brexiteers to key cabinet positions is consistent with a government that will press hard to deliver Brexit at the end of October with or without a deal.”

Sterling is the worst performer in the Group-of-10 currencies this month as investors brace themselves for the risk of both a no-deal Brexit and a general election. Morgan Stanley sees the pound falling to as low as parity with the dollar under a no-deal Brexit scenario.

The new British premier has set up cabinet groups to prepare for a no-deal Brexit and is expected to speak to more European leaders over the coming days.

Sterling slid 0.7 per cent to $1.2292 in London, the lowest level since March 2017. It weakened 0.7 per cent to 90.47 pence per euro. The yield on UK 10-year government bonds fell four basis points to 0.65 per cent.