Pound slides after Johnson reveals plan to suspend parliament

The pound came under intense selling pressure yesterday after Boris Johnson announced plans to suspend parliament for five weeks before the Brexit deadline, raising the chances of a no-deal exit from the EU.

Sterling sold off sharply on the foreign exchanges on Wednesday morning, falling by more than a cent against the US dollar to a sixday low of below $1.22, and by almost as much against the euro, to €1.096.

Sterling clawed back some of the losses by midday as MPs voiced anger at the prime minister’s plan. Senior business figures also sounded the alarm over the potential impact on the economy.

Craig Erlam, a senior market analyst at the financial trading firm Oanda, said: “This isn’t the first we’ve heard of these dirty tactics but it was maybe hoped that such undemocratic measures would not be needed or used. Either way, it certainly caught markets off guard.”

City analysts said the government moving to shut down parliament would raise the likelihood of a nodeal scenario that would be damaging for the economy, while the backlash from MPs could lead to a snap election.

The pound had rallied over recent weeks as Johnson appeared to be manoeuvring to strike a new deal with Brussels, after meetings at the G7 summit with the German chancellor, Angela Merkel, and the French president, Emmanuel Macron.

The FTSE 100 rose by about 14 points to trade around 7,108. Shares in the index of major UKlisted companies typically rise when the pound falls, as the firms generate much of their revenue in foreign currencies.

The more domestic-focused FTSE 250 index dropped by about 0.8% as stocks across Europe fell on Wednesday morning.

Adam Marshall, the director general of the British Chambers of Commerce, said the government’s top priority should be to avoid a nodeal Brexit.

“Despite the noise, none of the events of the last few days have given businesses greater confidence that this will be achieved. Given this, it is essential for government and its agencies to further boost support for businesses through any scenario,” he said. Once again, businesses will have to try their best to prepare for an unclear future as the political process goes down to the wire.”