Sterling fell below $1.24 today, levels not seen in over two years, as investors continued to price the growing risk of Britain's crashing out of the European Union without a transition agreement in place. 

Economic data is also showing that the UK economy is struggling, which in turn puts more pressure on the Bank of England to ease monetary policy.

Investors are taking to currency derivatives and futures markets to bet on more weakness. 

In October 2016, the British currency dropped briefly below $1.15, its lowest in more than three decades, during a flash crash in the currency markets in early Asian trading hours. 

It has since recovered, strengthening to nearly $1.34 earlier this year. 

But fears the next British prime minister will drag Britain out of the EU without a deal has prompted traders to dump the pound in recent days. 

Arch-Brexiteer Boris Johnson is the favourite to become Conservative Party leader next week and hence the next prime minister. 

Johnson and his opponent for the leadership, Jeremy Hunt, have been vying with each other to show party members their willingness to force a "hard" Brexit.

The pound was trading at $1.2398 in mid-morning trade after earlier touching its lowest level since April 2017. 

Sterling has lost 1% against the euro this month and around 2.3% against the dollar, putting it on track for its biggest monthly drop since June 2018. 

It is also this year's worst-performing G10 currency against the dollar. HSBC strategists said a "no-deal" outcome would push the pound all the way to $1.10.

Traders' fears seem justified, with Britain's Brexit minister, Stephen Barclay, telling politicians today that no-deal risk was "underpriced". 

The hard Brexit risk was boosted this week when both Johnson and Hunt said they would not accept the Northern Irish backstop in Theresa May's proposed Brexit agreement.

If the backstop is implemented, the UK would follow many EU rules until arrangements are made to avert a hard border. 

That has sent investors scurrying to price greater pound volatility, with implied volatility gauges jumping in recent days. The six-month contract, encompassing the October 31 Brexit deadline, has risen above 9 vols for the first time since early-April, up from 8.3 vol two weeks ago.