Pound heads for biggest monthly loss vs euro in two years, beset by Brexit

FILE PHOTO: Pound Sterling notes and change are seen inside a cash resgister in a coffee shop in Manchester, Britain, Septem,ber 21, 2018. REUTERS/Phil Noble

LONDON (Reuters) - The euro rose against sterling for a second straight day on Friday as the battle to succeed Prime Minister Theresa May sapped appetite for the British pound, putting it on course for its worst monthly loss against the single currency in two years.

Nearly a dozen candidates are vying for the prime minister’s job, but the bookmakers’ favourite is Boris Johnson, who says Britain should leave the European Union on Oct. 31, even without an agreement on the terms of its departure.

The Conservatives lost badly in last week’s EU elections, and a recent opinion poll showed the Conservative Party would suffer its worst general election defeat ever if a vote were held now. Analysts say that prospect is pushing candidates to take a harder line on Brexit, weakening the pound.

“We remain worried on sterling and look for the pound to fall to 0.90 versus the euro, as the prospect of a new eurosceptic prime minister won’t bode well for the markets and represents a clear negative,” said Petr Krpata, a currency strategist at ING based in London.

On Friday, the pound was trading less than 2% from that level at 88.40 pence. It was on track for a monthly drop of nearly 3% against the euro, its biggest loss since May 2017.

Against the dollar, the pound was steady at $1.2611.

Reporting by Saikat Chatterjee; editing by Larry King