— This is the script of CNBC's news report for China's CCTV on July 30, 2019, Tuesday.
Sterling bulls, who hope the election of Boris Johnson could boost pounds, they probable feel disappointed recently as after Boris took office, pound continued its devaluation and even get worse.
Taking office for only one week, the pound has lost more than 1 per cent against the dollar and the euro, at around 1.22 and 1.1. Sterling has now fallen to a 28-month low against the dollar.
The most immediate reason, of course, is that the appointment of Johnson has made clear the tough stance of the current British government on Brexit, raising the risk of a hard Brexit. Johnson immediately pushes for a Brexit, and recently issued an ultimatum to the EU.
Saying unless EU leaders agree to renegotiate the terms of the Brexit agreement reached by his processor Theresa May or he will not negotiate with the EU anymore and the Britain will leave EU without deal. However, European commission Juncker has also made it clear that the EU will not resume negotiations on a Brexit deal. The European Union is reported to be on the verge of depriving five countries, including Canada and Singapore, of access to EU financial markets this week.
It is also seen as a warning from the European Union against a hard Brexit. The move has raised fears that if a hard Brexit happens, then that will threaten London's position as the finance city of the world. In fact, foreign direct investment in the UK has continued to decline since the Brexit process began.
A negative growth firstly happened in the 1st quarter of this year. Britain's investment appeal has fallen to its lowest level in six years.
This has led to a number of business groups in the UK stepping up their lobbying efforts in the hope that the UK will abandon its no-deal Brexit. The deadline for leaving the European Union on October 31 is less than 100 days away, Under Johnson; the British cabinet has been replaced by hardliners, preparations for Brexit are also seen as a high priority. But the confederation of British industry, in its latest survey, argues that neither the EU nor business are fully prepared for a hard Brexit, especially the EU.
Despite the efforts of both sides, it is clear that many areas need to be improved, which requires not only large amounts of money, but also extensive publicity and education. If unprepared, a hard Brexit would directly disrupt economic activity, causing port delays and shortages of essential supplies such as medicines.
In that case, both sterling's position as the world's dominant currency and London's title as the international finance city could face serious challenges