STERLING saw what was left of its major gains following the revelation of Boris Johnson’s General Election victory wiped out yesterday, as the Prime Minister spooked markets with proposed legislation to prevent extension of the Brexit transition period.

The move by Mr Johnson to add a new clause to the Brexit bill to rule out extending the transition period beyond the end of 2020 - which the Prime Minister claimed would end years of “deadlock, dither and delay” – reignited fears of a no-deal departure.

The pound plummeted against the dollar and euro as financial markets priced in the elevated no-deal fears.

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Sterling was, at 5pm yesterday, trading around $1.3115, down by more than two cents from its Monday close in London of $1.3330.

The pound traded around $1.31 as voters went to the polls last Thursday. It then spiked above $1.35 in the wake of an exit poll published immediately after the polls closed at 10pm, which showed a clear Conservative majority.

Mr Johnson has pledged to take the UK out of the European Union by January 31. Experts have flagged huge challenges to concluding a future trade deal with the EU before the transition period runs out, given the length of time such agreements usually take.

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David Madden, analyst at CMC Markets UK, said: “GBP-USD has been hit hard by profit-taking over the fears surrounding the possibility of a no-deal Brexit post the transition period. The currency pair is now below the pre-exit poll level, as traders are dumping the pound. When it comes to the fear of a no-deal Brexit, the currency markets are more rattled than stock markets.”

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Andy Scott, associate director at financial risk adviser JCRA, said: “By outlawing an extension, it leaves very little time in which to agree a comprehensive free trade agreement with the EU and means the clock is now ticking down to a firm cliff-edge next December. “

The euro was, at 5pm yesterday, trading around 85.02p, up nearly 1.5p on its Monday close. It had dropped below 83p in the wake of Thursday’s exit poll.