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The British pound tumbled on Tuesday, with investors rattled by a report that the government wants to legally prevent the Brexit process from extending beyond next year, something that could raise the chances of a hard exit.
The pound GBPUSD, -0.8924% slid nearly 0.6%% to $1.3260, from $1.3335 seen late in North American trading on Monday. The FTSE-100 index UKX, -0.11% slipped 0.1% at the start of trading.
Sterling has surged 8% in the latest quarter, gaining strength after a landslide General Election victory for Prime Minister Boris Johnson’s Conservative Party and raising hopes for a quick resolution to the Brexit saga.
The post-Brexit transition period can be extended provided both the EU and U.K. agree, by up to two years, but that an amended Withdrawal Agreement Bill, due to be voted on this week, would rule that out, reported the BBC and other media outlets.
“The report also stated that the revised Withdrawal Agreement Bill would require the UK to have arrangements in place to leave the EU by December 31st next year, setting a hard deadline,” said Peter Iosif, senior research analyst at IronFX.
“Analysts tend to note that crafting such a trade deal with the EU, should take at least more than a year, hence markets had assumed that an extension would be required, now hopes for such an extension fade away,” he told clients in a note.
