Sterling edged higher today but London stock markets fell as the battle for the leadership of the governing Conservative Party entered its final lap.
Voting papers were sent out to party members on Saturday, and the winner is likely to be announced on 23 July.
If, as expected, Boris Johnson is declared the winner, the possibility of a no-deal Brexit will sharply increase.
Committed to 31 October deadline
His rival, the Foreign Secretary Jeremy Hunt, has taken a more nuanced line. Unlike Mr Johnson, former Mayor of London, he has not tied himself to the 31 October deadline for the UK to leave the European Union.
The blue-chip FTSE 100 Index was 0.03% down today at 7,550.82 while the FTSE 250, whose constituents are more representative of domestic British business, was 0.19% lower at 19,617.06.
In terms of the yen, it dropped 0.04% to 135.8450 yen.
Mr Johnson is committed to renegotiating the withdrawal deal that the current Prime Minister Theresa May proved unable to get approved by Parliament. The EU has said the agreement cannot be re-opened, hence Mr Johnson’s pledge that no deal is better than the current agreement.
He added: “We need a change of direction. That’s why we must treat 31 October as a real deadline for leaving the EU, come what may, not a fake one.
Fiscal firepower being lined up
“The hour is darkest before the dawn. Get this done and we can turn things around. What I’m offering is a more optimistic, dynamic approach to these negotiations. I want a deal. I believe our European friends want one and they will be in no doubt that we are serious because we will prepare all-out for no deal.”
One problem with Mr Johnson’s no-deal scenario is that there is no majority in Parliament for such a course of action.
Mr Johnson wrote: “If our friends [in the EU] feel they cannot agree, then we will be match fit for no deal. We will have the fiscal firepower to support business and agriculture. We will be free to substantially diverge on tax and regulation.”
Meanwhile, Transport Secretary Chris Grayling has been accused of trying to silence the Road Haulage Association to prevent it raising public concerns about a no-deal Brexit.
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