Theresa May is still Prime Minister and the official leadership contest begins on June 10th, and we're starting to learn which candidates will be running for the position. Boris Johnson is still the bookies' favorite to win the leadership challenge, but a fierce "anti-Boris" camp has emerged and Johnson's entry to Downing Street is not guaranteed. Former Brexit secretary Dominic Raab, a pro-Brexit member like Johnson, has launched a "clean campaign" pledge that excluded his competitor.
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The key push in British politics is for a clearly defined Brexit strategy after the leadership challenge, which none of the candidates so far have put forward to unite the Conservative Party to command a majority. For me this is a sticking point for the pound, with no clear pathway comes no clear outcome.
The pound is struggling against all major currencies as the turmoil continues in the Brexit saga. It has seen losses against the euro since a peak high at the beginning of May, before falling to its current interbank levels of the 1.12s today.
The pound could remain under pressure for the foreseeable future. GBP may retain a weak undertone as recent political developments continue to suggest that we are no closer to knowing the path of the government in their plan. A new Prime Minister and the parliamentary recess will make it very difficult to achieve even a 'no deal' departure before the end of October. The longer the uncertainty goes on the more it will dampen economic prospects and delay any chance of the Bank of England tightening monetary policy, and with no party able to command a majority there is simply little political certainty for markets to latch on to. However, light at the end of the Brexit tunnel is the consistent reminder that there is potential that a new leader could create some clarity on the direction of the UK Government. Any certainty is likely to cause movements on the markets.
There are a few snippets of data out this week including Construction PMI which is forecast to remain unchanged at 50.5, indicating industries are still feeling the struggle from Brexit. Services sector Purchasing Manager's Index (PMI) is out on Wednesday at 09.30 and it is forecast to show a rise to 50.6 from 50.4. Both sets of data will be considerably overshadowed by any Brexit/political developments in the coming week.
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