© Bloomberg. A crumpled British twenty pound banknote sits in this arranged photograph in London, U.K., on Thursday, Oct. 13, 2016. The U.K. currency is getting harder to trade, and to predict, because the nation’s exit from the European Union has changed the rules of engagement. Photographer: Miles Willis/Bloomberg

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The fell to the lowest level since 2017 as the market once again reckoned with no-deal risk after the contenders to be U.K. prime minister intensified demands to renegotiate on Brexit.

Sterling was at its weakest level in more than two years versus the dollar and hit a six-month low against the euro, as Brexit negotiations appeared to turn more hostile. Both leadership contenders Boris Johnson and Jeremy Hunt have said the so-called backstop plan to avoid a hard border in Ireland, considered essential by Brussels, would need to be scrapped.

After a strong start to the year, the pound is now on course to be the worst performer in the Group-of-10, at the bottom of the rankings for the past year. The next U.K. prime minister will be named next week, with the Oct. 31 Brexit deadline looming.

“The pound weakness is a reaction to the two prime minister contenders opposing the Irish backstop, which dramatically reduces the chance for a Brexit with a deal,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG (DE: ). “So this leaves only two options, no-deal Brexit, or no Brexit. As both Johnson and Hunt have made clear they want Brexit, chances of a no-deal Brexit are rising.”

The U.K. currency slipped 0.8% to $1.2418 by 11:50 a.m. in London, taking its total decline so far this month to 2.2%. It weakened 0.5% to 90.38 pence per , the lowest since Jan. 11, and also fell against the Swiss franc to the weakest since August 2017.

Money markets moved to price in a 50% chance of a Bank of England interest-rate cut in 2019 because of the risk of the U.K. crashing out of the European Union, as the politics outweighed better-than-expected labor market data. U.K. government bonds outperformed German bunds, with benchmark gilt yields falling one basis point to 0.79%.

The beleaguered currency is finding few backers, with both leveraged funds and asset managers increasing their pound shorts, according to the latest data from the Commodity Futures Trading Commission. Deutsche Bank (DE: ) AG’s global head of currency research George Saravelos said the currency is not cheap enough, even after falling more than 5% in recent weeks, and that there is now a close to 50% chance of a hard Brexit.

A meeting of Brexit negotiators last week was one of the most difficult of the last three years, according to European officials, as they brace for talks to become more hostile under the next British government. Johnson and Hunt appeared to toughen their rhetoric in a debate late on Monday about the Irish backstop. Both have long said they want it renegotiated but last night they further limited their room for compromise.

(Updates with latest market pricing from 1st paragraph.)