Reuters

The pound sank on Tuesday after Prime Minister Boris Johnson moved to change the law on Brexit, making it illegal for Britain to continue negotiations with the EU after 2020.

The pound fell 1.2% against the dollar and 1.5% against the euro at 1:20 p.m in London.

The losses look set to wipe all of the currency's post-election gains since Johnson's Conservative party won a decisive victory late Thursday.

"This sets up another cliff-edge and could create yet more months of uncertainty for investors just when we thought all was squared away," one analyst said.

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The pound sank on Monday morning after Boris Johnson put forward a law that would raise the risk of Britain crashing out of the EU by the end of 2020 without a deal.

The pound fell 1.2% against the dollar and 1.5% against the euro at 1:20 p.m. in London.

The prime minister on Tuesday moved to change the law on Brexit, making it illegal for Britain to continue negotiations with the EU after 2020. The losses would wipe all of the currency's post-election gains since Johnson's Conservative party won a decisive victory late Thursday.

This comes despite warnings from the EU's chief Brexit negotiator Michel Barnier that making a "comprehensive" free-trade deal would be near impossible by the end of 2020.

Johnson's move "means no possible way to extend the transition period," said Neil Wilson, chief markets analyst at Markets.com. "I must confess to believing he wouldn't need to be so drastic, that a large majority offered the flexibility yet strength a government craves in deal-making."

That large majority, won in the UK election last week, was key to sending the pound surging late last week, as traders hoped for a clear Tory mandate and certainty about Brexit.

"This sets up another cliff-edge and could create yet more months of uncertainty for investors just when we thought all was squared away," he added.

For more on Johnson's plan, which is due to be put forward to the UK Parliament on Friday, click here.

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