The pound fell to a 10-year low against the euro overnight amid concerns surrounding a no-deal Brexit.
The currency plunged to 93.26 pence against the euro in the late hours of Sunday, the lowest it has been since October 2009, when the financial crisis gripped Britain.
The pound also fell to a 31-month low of $1.2015 versus the US dollar, Reuters reported.
In a positive upturn, sterling rose by 0.5% against the euro at 92.61 pence by Monday morning as renewed concern over Italian politics took the euro down against most major currencies; the Italian Deputy Prime Minister Matteo Salvini threatened to bring down the coalition government saying he has lost faith in it.
The pound was also higher by 0.3% against the dollar and last at $1.2062 while the euro was down by 0.2% at $1.1175 and by 0.6% at 117.63 against the Japanese yen.
The currency’s fall on Sunday is thought to have affected some Britons heading abroad for the summer holidays who face receiving less value when exchanging spending money.
“A significant compression of UK yields and Brexit undertones” are why the pound dropped against the euro, said Kamal Sharma, forex strategist at Bank of America Merrill Lynch.
This is a “natural breeding ground for sterling losses,” he said, a “double whammy effect.”
Reuters reported that low liquidity and media reports that Ireland would not renegotiate the Brexit backstop at a meeting with UK Prime Minister Boris Johnson later this month also weakened sterling, analysts said.
This is thought to have worsened fears Britain would crash out of the European Union with no-deal in place in October.
Johnson has accepted an offer to meet Irish leader Leo Varadkar to discuss Brexit and the Northern Irish backstop; a meeting could take place before a G7 summit in France later in August.
The backstop, part of the withdrawal agreement that former Prime Minister Theresa May struck in November, is a crucial part of negotiations that will see an orderly British exit from the EU.
A report by the Institute for Government think tank, published on Sunday, said “time is running out” for MPs who oppose a no-deal Brexit to prevent the government from pulling the UK out of the EU without a deal at the end of October.
“The combination of a slowing economy, global economic weakness, the increasing chance of a cut to interest rates and the risk of a No-deal Brexit will continue to anchor sterling,” Neil Wilson, chief market analyst at Markets.com, said in a note.
“No-deal talk is the biggest concern - remove that and we get a big bounce even with the economic and monetary risks”.