(Reuters) - Sterling weakened further on Wednesday, trading at a new 27-month low against the dollar below $1.24, as markets continued to price in the growing risk of Britain crashing out of the European Union without a transition arrangement in place.
Arch-Brexiter Boris Johnson is seen a shoo-in to be voted Conservative Party leader next week and hence become the next prime minister. Johnson and his rival Jeremy Hunt have vied with each other to show party members their willingness for a "hard" Brexit.
Traders say that is increasingly driving investors to hedge sterling exposure and options markets show a bias for further sterling weakness.
By 0720 GMT, the pound was down 0.15% at $1.2386 <GBP=D3>. It lost 0.2% against the euro to trade at 90.51 pence, a new six-month low <EURGBP=D3>.
"The pound is at new lows but we see still strong fundamental reasons for the negative momentum to continue," MUFG strategists told clients, noting that Brexit was taking a heavy toll already on the economy.
"The flow of economic data is also now pointing to the potential of recession in the UK."
Investors are watching inflation data later on Wednesday, following Tuesday's jobs print that showed signs that hiring was starting to slow.
The currency has lost 1.4% against the single currency so far this month while against the greenback it has fallen around 2.4%. It was already the worst performing G10 currency in the second quarter.
(Reporting by Olga Cotaga and Sujata Rao; Editing by Dhara Ranasinghe)
