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Scandal in Cabinet weakens pound

currency-newsScandal in Cabinet weakens pound
Tensions surrounding recent controversies involving Boris Johnson and Priti Patel boiled over yesterday, with the pound weakening as Theresa May faced intense pressure to sack the offending Cabinet members.

The pound is rebounding this morning but, as ever with Sterling, there is always a chance this trend could be reversed later in the day. GBP/EUR is up to €1.1326, while GBP/USD has risen to US$1.3146. GBP/AUD has risen to A$1.7097, but GBP/NZD is flat at NZ$1.8857. GBP/CAD has climbed to C$1.6724.

Read on to find out what Johnson and Patel did that saw their fellow MPs calling for their dismissal, and what impact this had upon the pound…

What’s been happening?

The pound was on poor form yesterday after fresh scandal embroiled the government.

Pressure was building for Prime Minister Theresa May to sack Foreign Secretary Boris Johnson and International Development Secretary Priti Patel.

Calls for Johnson to be sacked come after he claimed in Parliament Nazanin Zaghari-Ratcliffe was ‘teaching people journalism’ while in Iran; the British charity worker is currently serving five years in prison accused of spy charges, and claimed in her defence that she was not working and was on a family holiday.

Johnson’s gaffe could see Zaghari-Ratcliffe’s sentence doubled.

Meanwhile, Patel was under fire after failing to disclose to Downing Street that she met with Israeli officials during a recent holiday, which included a visit to a hospital in Golan Heights; a region Israel’s control of which the international community refuses to recognise.

With Defence Secretary Michael Fallon having resigned last week in response to accusations of inappropriate behaviour towards female colleagues, May faced losing two more key Cabinet members.

In the end, Patel resigned upon returning to London.

Johnson and Patel are key Brexiters, so the Cabinet looks likely to see infighting intensify and May’s position weaken as MPs react to her picks for replacements to Patel - and Johnson, should he depart as well.

Sterling’s weakness saw GBP/EUR tumble, although elsewhere the euro was faring poorly. A lack of fresh domestic data left markets considering the long-term outlook for Eurozone monetary policy, which isn’t exactly rosy given the latest spate of poor data releases.

GBP/USD also slumped yesterday, although this was largely down to weakness in the pound.

The US dollar was continuing to muddle along, with nothing on a calendar to support it significantly higher, but with those enormous odds of an interest rate hike next month keeping a firm floor beneath it.

What’s coming up?

Pritti Patel may have resigned from the Cabinet, but it is likely the fallout from her meetings with Israeli officials could continue to weigh on the pound.

Today’s Eurozone data calendar is all about the European Central Bank (ECB). As well as the latest economic bulletin and forecasts from the European Commission, a slew of policymakers will be speaking at various events throughout the day.

The US dollar could be softened by today’s jobless claims data, which is expected to show a small uptick in the number of people claiming out of work benefits.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees 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 FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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