The pound fell against the majority of its major currency pairings yesterday after it was reported that around a dozen Conservative MPs could potentially support a vote of no confidence in the Government, if the UK looks as though it is headed in the direction of a no deal Brexit.
|Currency Pair||% Change (Month)||Difference on £200,000|
Defence Minister Tobias Ellwood spoke yesterday with BBC’s Panorama, suggesting that many ministers could rebel against their Government calling a vote of no confidence, which if lost could trigger a general election. Currency markets do not react well to uncertainty and given that the UK is currently in the height of uncertainty, a general election being called could have severe implications for sterling exchange rates.
The 2 candidates now battling for the role of Prime Minister are Boris Johnson and Jeremy Hunt, with the most likely candidate being Johnson with chances of 79% according to polls, however the gap between the 2 is narrowing and is down from 92% just last week. Reports over the weekend of Boris Johnson’s private affairs may have had a part to play in the loss of support, after Police were called to his home when a loud altercation was reported.
Johnson has since declined to take part in a televised debate on how to tackle Brexit, providing yet more uncertainty, with Jeremy Hunt calling Johnson a coward. I would expect this to be just the start of tit-for-tat comments between the 2 hopeful leaders, and we could see volatility for GBP exchange rates between now and 22nd July when the new Prime Minister is expected to be announced.
Aside from Brexit and the race for the position of Prime Minister, investor focus will be drawn to Wednesday when UK Inflation Report Hearings will be released, giving Bank of England policymakers another opportunity to put forward their opinions on the current state of the UK economy. As the Bank of England monetary policy statement last week cited Brexit as a main concern for the Central Bank, it will be interesting to see if any further comments are made towards this cautious sentiment, especially given the slight dip in UK economic data in recent weeks. Clients with an upcoming transfer to make involving the pound could benefit from detailing their requirements to the team here at FCD, so that we can keep you informed of all the latest developments.
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