After a drop in value on Wednesday afternoon, followed by a continued sell-off yesterday we’ve seen sterling hit some of the lowest levels seen since February against some currency pairs.
|Currency Pair||% Change (Month)||Difference on £200,000|
The cable (GBP/USD) interbank rate has now dropped below 1.28, and the pound to euro rate has broken the long-term support level of 1.15 and reached levels as low as 1.1430 since falling through that support level. This is an almost 3% drop for GBP/EUR from the highs seen earlier this month, when the pair almost traded as high at the interbank rate of 1.18 on hopes of positive talks between Conservative and Labour leaders regarding May’s Brexit deal.
Earlier this week Prime Minister May announced plans for yet another vote on her Brexit plan within Parliament. After three failed attempts this will surely be her last. The next vote on her deal is outlined for early June, and the announcement has softened the pound's value, especially now that some political experts are predicting another loss for May and perhaps by a greater margin than her last attempt.
The fears of a disorderly Brexit are increasing again as reports of cross-partly talks stalling remain in the headlines. If May’s deal is voted down again the chances of the UK leaving the EU on the new extended deadline date of the 31st of October decline, so the uncertainty is likely to continue to negatively impact GBP exchange rates.
UK Prime Minister May is facing continued pressure to announce the date of her departure as PM.
The talks with Labour leaders were originally unpopular and now that they appear to be stalling, the pressure on her is mounting. In the early hours of this morning the BBC has reported that talks between the Tories and Labour are set to close without a deal in place, and this has caused a slight sell-off in the pound.
It’s reported that May and Labour leader Jeremy Corbyn will now move onto a second phase of negotiations, which will be aimed at agreeing a process of Parliamentary votes designed to help find a consensus for the Brexit plan.
After surviving a vote of no-confidence in December, and Conservative leaders voting against amending party rules to allow for another vote of no-confidence, the pressure has been building on Mrs May to make a decision. Yesterday afternoon she announced that she will make her decision after the vote next month, so this is worth following due to the potential impact on GBP exchange rates.
Yesterday Boris Johnson confirmed that he will run for the Conservative Party leadership once May has stepped down, so we will find out more about this matter after next month’s vote.
A change of leadership so close to the expected Brexit date could have a negative impact on the pound's value, especially if she were to be replaced by a stanch Brexiteer.
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