Pound Sterling hit over 2-year low on Friday on an unexpected contraction in UK's economy reported the same day. Official data on Friday showed that the United Kingdom's GDP (gross domestic product) shrank in the June ended quarter at 0.2 percent, its first contraction since 2012.
The British currency, which is already under pressure over a possible "No-Deal Brexit", sank to $1.2056, its weakest since January 2017. the pound has lost 3.7 percent in value after arch-Brexiteer Prime Minister Boris Johnson took office in July. Against the euro, the pound slid to a new two-year low of 92.885 pence, Reuters reported.
With the 31 October deadline fast approaching, it is likely that there will be a No-Deal Brexit as Johnson vows to leave the European Union before the set deadline. Investors are concerned that should the UK leave without a deal, the pound will remain weak until the country adjusts with the European Union following the Brexit.
Further, analysts said that if the UK reports another contraction for the September-ended quarter, the country will technically enter recession, which is defined as two back-to-back quarters of economic contraction.
On a year-on-year basis, UK's economic growth slid to 1.2 percent from 1.8 percent in the first quarter as per Britain's Office for National Statistics' data. The numbers are at their weakest since the start of 2018.