Pound exchange rate slumps as Theresa May bows to Brexit pressure

The pound fell back against the majority of its peers on Monday, with investors shunning the currency as Theresa May bowed to pressure from within her party to change the wording of her customs bill.

Sterling continues to struggle this morning, with GBP/EUR edging down to €1.1288, GBP/CAD dipping to C$1.7368, GBP/AUD slipping to AU$1.7829, with GBP/NZD seeing the most notable losses as it plummets to NZ$1.9388. Only GBP/USD is showing any real resilience this morning as it holds at $1.3252.

Looking ahead, today’s UK labour report could prompt the GBP exchange rate to tick higher, especially if domestic wage growth beat expectations in May…

What’s been happening?

The pound was initially stable at the start of this week’s session as it consolidated its gains from Friday’s Trump driven rally.

However the currency fell back during the afternoon as Theresa May, in seeking to avoid a standoff with Brexit Hardliners within her party, bowed to pressure and accepted changes to her Brexit customs bill.

Sterling fell as not only did the changes possibly water down the PM’s plans for a ‘soft’ Brexit, but were also viewed as weakening her standing within the party, potentially opening the way for a leadership challenge down the line.

The GBP/EUR exchange rate traded flatly for much of Monday as EUR investors digested the Eurozone’s latest trade balance figures.

Eurostat’s report revealed the Eurozone’s trade surplus unexpectedly narrowed in May, dipping from €16.7bn to €16.5bn and dragging on the euro.

Meanwhile the GBP/USD exchange rate briefly pressed higher during yesterday’s trading session, with a bout of profit taking leading to some broad-based weakness in the US dollar.

With the US dollar having enjoyed its largest weekly gains in a month during the previous session, investors were keen to cash out their gains despite a solid US retail sales report.

What’s coming up?

Today will see the UK publish its latest jobs data, providing investors with an idea of how the UK’s jobs market held up in March, with a particular focus likely to be placed on the latest wage growth figures.

This is set to be one the final major UK economic releases ahead of the Bank of England’s (BoE) next policy meeting in a couple of months, with markets likely to use today’s data to help gauge whether an August rate hike remains on the table.

This could see the pound surge if economists believe the data is supportive of a hike.

The US dollar will also be in focus today as Federal Reserve Chair, Jerome Powell is quizzed on monetary policy at a congressional testimony, with the USD exchange rate potentially weakening if recent trade tensions leads to a more cautious outlook.

Finally the euro may be left a little exposed today, with a lull in notable data releases possibly leaving momentum in the single currency to be driven by external influences.