Sterling fell sharply today, extending losses as fears grew that Britain was preparing to undercut its Brexit divorce treaty and potentially torpedo trade talks with the European Union.
The latest round of negotiations started today, with Britain warning Brussels that it was ramping up preparations to leave without an agreement.
The EU has warned there will be no trade deal if Britain tries to override parts of the Withdrawal Agreement it signed in January.
Such a move could jeopardise the whole treaty and create frictions in Northern Ireland.
Sterling took another leg lower after reports that the head of the British government's legal department had quit over the suggestions that Prime Minister Boris Johnson was threatening to override the divorce deal.
The clock is ticking on an October deadline for a trade deal and the end of the status quo transition arrangement in late December.
After several months of rallying against the dollar, the sudden return of fears about a no-deal Brexit have frightened investors and knocked the pound four cents lower versus the dollar since the start of the month.
The pound dropped 1% to $1.3040, its weakest since August 13, while it also fell heavily against the euro to a two-week low of 90.40 pence.
