The pound has been on a downward trend this week, falling for 15 straight days against the euro as we start the trading day this morning, with the interbank rate hitting fresh lows of 1.13 against the euro and testing the 1.26 level against the USD.
|Currency Pair||% Change (Week)||Difference on £200,000|
The cause of the pound’s weakness stems from political uncertainty as Prime Minister Theresa May looks set to resign with reports suggesting she will outline her departure date later today. The reason the pound has steadily been falling is because this opens a leadership challenge for the Conservative Party, with many of the front runners bidding for the leadership being Brexiteers, this has increased the possibility of a hard Brexit or no deal scenario which is intrinsically linked to sterling weakness.
Prime Minister Theresa May’s departure has been expected after Andrea Leadsom voices her discontent at May’s ability to deliver the Brexit the Conservative Party wants. PM May was expected to outline her Brexit Withdrawal Agreement today but has delayed the announcement due to her own party reacting negatively to her withdrawal agreement, which offered more concessions than originally agreed upon including a second referendum if the bill was passed.
The British consumer is in focus this morning, with Retail Sales figures due to be released first thing. Quite a large drop is expected from last month and bodes worrying signs for the UK economy as retail sales make up a large part of UK Gross Domestic Product. A contraction to -0.3% from the 1.1% figure in April is expected so a larger than expected drop could see losses for the pound.
Later this morning it is expected that Theresa May will outline the plans for her resignation with reports suggesting that June 10th could be the date that the leadership challenge starts. Today and over the weekend, I would expect large volatility on sterling exchange rates as news becomes clearer on her resignation and on the European elections result. It may be a good idea to outline any plans you may have involving a sterling-based transfer with your broker here today to see how we can help you minimise your exposure to the markets.
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