Sterling fell on Friday and implied volatility surged as markets increasingly price the risk of the UK crashing out of the European Union at the end of the month with no trading arrangements in place.
Prime Minister Boris Johnson said there was “a strong possibility” Britain and the EU would fail to strike a new deal, but vowed to do whatever he could to avoid a tumultuous split.
The pound fell 0.5% against the dollar to a low of $1.3225 and lost 0.3% to the euro at 91.6 pence — a two-month low.
Jitters were clear on derivatives markets too where implied volatility, an options market gauge of expected price swings, rose further. One-week and overnight volatility rose above 20% to the highest levels in more than eight months
Reporting by Sujata Rao; Editing by Tommy Wilkes