British politics has been rocked to its core, following a chastising few days for the UK’s two leading political parties.

Currency Pair% Change (Month)Difference on £200,000
GBPAUD2.3%AUD $8,560

The Tory Party has been left in tatters following the European election results, which saw the governing party receive only 8.7% of the vote, leaving them trailing behind even the Green Party as the final votes were counted over the weekend. 

This devastating result capped off one of the worst weeks in the party’s history following Prime Minister Theresa May’s announcement on Friday that she would relinquish her position in number 10 by June 7th.  

The PM’s announcement, whilst somewhat anticipated, brought mixed reactions. Some sympathised with her following a gruelling few months in office, which has seen her come under fire from many quarters for the UK’s lack of progress with Brexit. 

Despite the furore surrounding the past few days’ political developments, the pound has managed thus far to avoid any significant downturn against most of the major currencies.

Economic Factors That Could Impact GBP Rates

Sterling survives any major downturn for the time being

Despite a desperate few days for the UK Government, GBP/EUR interbank rates continue to trade just above 1.13 whilst GBP/USD rates fell slightly back below 1.27. Whilst there was also downturn against the commodity-based currencies, it is somewhat surprising that there was not the sharp sell-off many may have expected following the significant events of the past few days.

In truth, it may be that investors had already priced in the PM’s expected resignation. The European election results may in the long run count for little, considering the UK is unlikely to be participating in the longer-term, should Brexit finally happen under the stewardship of a new Prime Minister.

The Tory Party will be aware that a long drawn out leadership contest is unlikely to go down well with the public, who have already used the European elections to voice their displeasure at the handling of Brexit with votes clearly favouring the UK Brexit Party led by the controversial figure Nigel Farage.

Whether the Brexit Party can infiltrate mainstream UK politics is certainly debatable but with the Tory Party in tatters and Labour seemingly unable to take advantage of the golden opportunity that this has presented them with, there is a clear vacuum that needs to be filled.

With the Liberal Democrats, performing well under there no-Brexit mantra, it is clear that the country remains split over Brexit and its long-term benefits.

Sterling may well struggle to make any sustainable impact this week, with little economic data of note. Investors may well continue to shy away from the pound, whilst the on-going uncertainty that has engulfed UK politics continues to manifest itself, with the current outlook clouded in uncertainty.


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