Pound slides as Theresa May’s grip on power weakens
Philip McHugh November 14th 2017 - 2 minute read
Prime Minister Theresa May’s authority took another blow yesterday as it emerged that 40 members of her own party were prepared to sign a letter of no confidence in her leadership. This was just one of the chaotic developments embroiling the government, so it was no surprise the pound slumped.
Sterling remains on weak form today. GBP/EUR is down to €1.1200, whilst GBP/USD has slipped to US$1.3095. GBP/AUD has fallen to A$1.7160, GBP/NZD to NZ$1.9104, and GBP/CAD to C$1.6685.
There will be plenty of volatility stemming from today’s economic data releases to keep GBP/EUR and GBP/USD on the move. Read on to find out what’s incoming…
What’s been happening?
The pound tumbled yesterday as it appeared that Theresa May’s authority as Prime Minister was waning even further.
Markets reacted negatively to news that the number of Conservative MPs backing a vote of no confidence in May was just eight shy of the 48 required to trigger a leadership challenge.
Additionally, sentiment was soured by earlier comments from Chief EU negotiator Michel Barnier that the EU was preparing for the collapse of Brexit talks; there were also unconfirmed rumours that officials were planning for a scenario in which the UK has a different Prime Minister.
On top of this, May’s ability to reign in her Cabinet members was called further into question after a letter from Boris Johnson and Michael Gove featuring their list of demands for Brexit was leaked.
Meanwhile GBP/EUR was further undermined by a report from the International Monetary Fund (IMF) that predicted the revival of the Eurozone economy would drive global growth, with the benefits of the recovery being felt in other parts of the globe.
Appetite for the US dollar remained strong thanks to bets of monetary tightening next month, helping keep GBP/USD on the downtrend.
What’s coming up?
UK inflation data is set for release this morning. While usually a highly influential event, today’s reports could be largely overlooked by markets, as they cover the period before the Bank of England (BoE) voted to hike interest rates and are therefore outdated.
What may be more relevant is today’s speech from Bank of England Governor Mark Carney, as the UK’s chief policymaker may reinforce the idea that interest rates aren’t going higher any time soon.
If the rest of the day’s headline Eurozone data follows in the footsteps of this morning’s stellar German GDP figures, the euro could be in for a day of bold gains. Italian and Eurozone preliminary GDP for the third quarter will be released in the next few hours.
On top of this, European Central Bank (ECB) President Mario Draghi and Federal Reserve Chair Janet Yellen will also be speaking at the same event as Mark Carney, promising volatility for the euro and US dollar as well.
Written by
Philip McHugh