Sterling plunged to lows last traded more than two years ago, as markets responded to the growing risk that Boris Johnson's Brexit strategy could lead Britain to a no-deal exit from the EU within months.

Johnson's demand that the Irish backstop must be ditched has been repeatedly rejected by Brussels, with one EU diplomat warning that the frontrunner in the Tory leadership contest appeared to be living in "a fantasy" world.

The pound fell 0.9 per cent on overnight to $1.2399 — its lowest since April 2017 — leaving it on course for its biggest single-session fall since March and

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