Sterling faces volatility as Boris Johnson announces new Brexit plan

EU leaders have already criticised the plan after details were leaked to the media on Tuesday

Britain's Prime Minister Boris Johnson delivers his keynote speech to delegates on the final day of the annual Conservative Party conference at the Manchester Central convention complex, in Manchester, north-west England on October 2, 2019. Prime Minister Boris Johnson was set to unveil his plan for a new Brexit deal at his Conservative party conference Wednesday, warning the EU it is that or Britain leaves with no agreement this month. Downing Street said Johnson would give details of a "fair and reasonable compromise" in his closing address to the gathering in Manchester, and would table the plans in Brussels the same day. / AFP / Ben STANSALL

The pound has fallen against the Euro and the US Dollar and faces an uncertain future as UK prime minister Boris Johnson prepares to deliver a speech confirming his final Brexit offer.

The new plan to take Britain out of the European Union was roundly rejected by Ireland on Tuesday, after details emerged including customs checks on the Republic’s northern border and a regulatory border in the Irish Sea for four years, effectively tying Northern Ireland to the EU until 2025.

Taoiseach Leo Varadkar told the Irish parliament on Tuesday that he expected Britain to honour the promise it made in December 2017 that there would be “no hard border as a consequence of Brexit”.

Sterling tumbled by more than half a per cent against the euro after Mr Varadkar’s government warned it was likely to reject the new plan. The pound sank to $1.2247 as Mr Johnson spoke at the Conservative conference in Manchester. Irish foreign minister Simon Coveney said the reported proposal would not provide the basis for a deal, adding that the proposal was "concerning".

Investors shared his scepticism: "I don’t sense an agreement between the two sides," said Neil Jones, head of European hedge fund sales at Mizuho. Therefore, "we’ll see a lower sterling" going forward.

Mr Johnson’s offer will make clear that if the EU does not engage with the proposal, Britain will not negotiate further and will leave on October 31.

The fall came despite a better than expected performance of the UK manufacturing sector.

The pound had mounted a comeback in September after it hit its lowest value against the dollar since January 2017 in August.

With less than a month until Britain is due to leave the EU, it remains unclear how Britain will carry out its biggest trade and foreign policy shift in more than 40 years. It might leave with a deal, without one or not leave at all.

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