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Europe, Forex

Sterling plunges to six-month low as no-deal Brexit worries build

* Graphic: World FX rates in 2019

* Graphic: Trade-weighted sterling since Brexit vote

By Olga Cotaga

LONDON, July 16 (Reuters) – The pound sank to a six-month low against the euro on Tuesday after a debate between the two candidates vying to be Britain’s next prime minister re-ignited worries about a no-deal Brexit.

Both frontrunner Boris Johnson and his rival Jeremy Hunt said late on Monday that they would not be willing to accept the so-called Northern Irish backstop element of Theresa May’s Brexit deal, which is one of Brussel’s principal demands in Brexit negotiations.

The backstop is an insurance policy designed to prevent the return of a hard border between EU-member Ireland and British province Northern Ireland.

Brexit jitters, coupled with recent poor British economic data, have been keeping sterling subdued and near its lowest levels in years.

The British currency weakened 0.4% on Tuesday to $1.2463 , a six-day low. If it drops below $1.2439 it would sink to its lowest in more than two years, excluding the “flash crash” on Jan. 3 when it dropped to $1.2409.

Against the euro it fell 0.3% to a low of 90.225 pence , the lowest since Jan. 11.

Traders are awaiting U.K. employment data at 0830 GMT, which will be watched closely for signs of further economic deterioration. A Reuters poll of economists expect average weekly earnings to rise 3.1% year-on-year in the three months to May, showing same growth as in the comparable period. (Reporting by Olga Cotaga Editing by Tommy Wilkes)

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