Sterling slid to a 28-month low amid mounting fears of a no-deal Brexit on Monday as Prime Minister Boris Johnson urged EU leaders to drop their opposition to renegotiating Britain's exit during his maiden trip to Scotland as UK leader.
Johnson, who was designated prime minister by members of his Conservative Party last week, is trying to pressure the EU to give ground by intensifying preparations for the UK to leave the bloc in three months without a deal.
Many investors say a no-deal Brexit would send shock waves through the world economy, tip Britain's economy into a recession, roil financial markets and weaken London's position as the pre-eminent international financial centre.
The pound, which was trading at $1.50 on the day of the 2016 referendum, dropped a cent to $1.2282, the lowest level since March 2017. Sterling has fallen two cents since Johnson was named as British leader on Tuesday.
Johnson's bet is that the threat of a no-deal Brexit will persuade the EU's biggest powers – Germany and France – to agree to revise the divorce deal that Theresa May negotiated last November but failed three times to push through the British parliament.
But the 27 other EU members say publicly and privately that the divorce settlement – including the backstop – is not up for barter.
The backstop ‘is dead’
Making his first visit to Scotland as prime minister on Monday, Johnson claimed there was every chance of striking a new Brexit deal with the European Union and that he wanted a new trade deal too – provided the backstop is dropped.
"What we want to do is to make it absolutely clear that the backstop is no good, it's dead, it's got to go. The Withdrawal Agreement is dead, it's got to go. But there is scope to do a new deal," Johnson said during a visit to a naval base.
"What we want to do is to build a new partnership with all the things that matter to us, sharing cooperation on defense, on security, on intelligence, cultural, scientific collaboration, everything that you would expect," Johnson said.
"At the core of it all a new free trade deal that allows us to take back control of our tariffs and our regulations and to do things differently where we want to," he added.
Earlier, his foreign secretary, arch-Brexiteer Dominic Raab, warned that London was “turbo-charging” preparations for a no-deal Brexit, arguing that the UK wanted a new Brexit deal but that EU leaders were being “stubborn”.
Another Scottish referendum?
Differences over Brexit have also strained the bonds that tie the United Kingdom, with most voters in Scotland and Northern Ireland voting to remain part of the EU in the 2016 referendum.
Johnson's promise to deliver Brexit, with or without a deal, has put him at odds with some in his party who oppose a "no deal" exit – including the leader of the party’s Scottish branch, Ruth Davidson.
Gordon Brown, a Scot and a former prime minister, said this month that Johnson could be the United Kingdom's last prime minister as he could be on a collision course with Scottish nationalists.
Last week, Scotland's nationalist leader Nicola Sturgeon wrote to Johnson telling him his Brexit plans would hurt the Scottish economy and that she would continue preparations for a second independence referendum.
Irish Prime Minister Leo Varadkar has also suggested that a no-deal Brexit could undermine Scotland's place in the United Kingdom, while also raising the question of the unification of Ireland and British-ruled Northern Ireland.
Ahead of his visit to Scotland, Johnson sought to downplay the threat to British unity, describing the UK as “the most successful political and economic union in history”.
On Monday he dismissed calls for another referendum on Scottish independence, describing the 2014 vote as “a once-in-a-lifetime, once-in-a-generation thing”.