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Pound exchange rates fall across the board as Theresa May faces crisis following two Cabinet resignations

currency-newsPound exchange rates fall across the board as Theresa May faces crisis following two Cabinet resignations
he pound was hit by considerable volatility on Monday as markets reacted to the resignation of two prominent members of Theresa May’s Cabinet.

Trade in Sterling looks a little more upbeat this morning however, with GBP/EUR climbing to €1.1290 and GBP/CAD rising to C$1.7412, while both GBP/AUD and GBP/NZD tick higher, striking AU$1.7776 and NZ$1.9389. Only GBP/USD currently remains flat at $1.3264.

Today will see the UK publish its latest industrial production figures, with the pound possibly recouping some of its losses should factory output have rebounded in May, as expected.

What’s been happening?

The pound initially surged on Monday as the Brexit Secretary David Davis announced his resignation in protest over Theresa May’s plans on leaving the EU.

Despite the uncertainty prompted by Davis’s departure markets took it in their stride, with many GBP investors optimistic his exit would help push the UK government towards a ‘soft Brexit’.

However these gains were undone immediately, following the resignation of the Foreign Secretary, Boris Johnson, later in the afternoon.

Johnson’s exit suggested the political crisis may be far greater than initially expected, with fears of further resignations or a possible leadership challenge leaving Sterling to flounder by the end of Monday’s session.

The GBP/EUR exchange rate was met by some dramatic swings at the start of this week, with the pairing initially surging as some weaker-than-expected German trade figures left the euro open to losses in the morning.

However the single currency was well positioned to ride higher in the afternoon as a relatively upbeat speech from European Central Bank (ECB) President Mario Draghi hit just before Johnson’s resignation.

Meanwhile, the GBP/USD exchange rate briefly struck a three-week high on Monday as USD investors remained concerned regarding the latest US jobs report, before falling back following the broad based slide in Sterling. 

What’s coming up?

The UK will publish its latest production and trade figures for May later this morning, possibly lending some support to the pound should they have improved in line with expectations.

However with markets wary of the political situation in the UK worsening, Sterling may find its potential to advance severely curtailed.

Meanwhile the euro could face some pressure this morning following the release of Germany’s latest economic sentiment survey, with trade war concerns likely to lead to an even gloomier outlook from economists in July.

Finally, the US dollar may advance during today’s trading session, with the only notable US data, the JOLTs job openings figures, expected to confirm employment is soaring in the US.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now overseas all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FSA approval and has completed the Certificate in International Treasury Management (CertiTM)

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