The pound is still flat on the canvas

While not as bad as Monday’s rout, the pound is once again falling on Tuesday.

Sterling sunk to a 7-year low against the dollar on Monday amid fear about Britain voting to leave the European Union in June’s upcoming referendum on membership.

The pound recovered from its nadir on Monday overnight, but began falling again in Asian trade.

At 7.55 a.m. GMT (2.55 a.m. ET) the pound is down 0.21% against the dollar at 1.412.

The pound is falling against all other major currencies on too:

Deutsche Bank’s Jim Reid writes in his Tuesday Earling Morning Reid morning macro note:

Any business trips I do in the near future will be conducted with fear that my Sterling currency will not get me very far given the Brexit (and other economic) concerns. However in a world where everyone seems desperate to competitively devalue against everyone else whilst creating the minimum of fuss internationally, perhaps London Mayor Boris Johnson’s defection to the ‘Out’ campaign is a masterstroke in so far as it seems to have single-handedly helped weaken the currency. All this without needing to resort to confrontational policy measures.

Panmure Gordon’s chief economist Simon French warns in a note emailed Tuesday morning that extended pressure on the pound could lead to deflationary pressure. He writes:

The transmission of Sterling weakness, through import costs, into UK CPI [consumer price index] is estimated at between 9-12 months and with a 20% pass through rate. The Bank of England estimate that the sterling-sensitive basket has on average accounted for 29% of overall CPI inflation over the 1998-2015q1 period. With a peak-to-trough decline of 9% since August 2015 there is the potential for a 2% marginal increase in UK inflation by the start of 2017 versus the August Inflation report.

UK gilts — government bonds — are taking a hit too. Despite rallying slightly this morning, gilt futures are down 0.01% at 8.00 a.m. GMT (3.00 a.m. ET) and are way below where they were on Friday night.

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