The pound fell against a number of major world currencies on Monday as doubts swelled around Theresa May’s leadership and her ability to deliver Brexit.
Sterling was down around 0.7 per cent against both the dollar and the euro in late trading at around $1.3100 and €1.1237 respectively. It also fell against the Swiss franc, Australian and Canadian dollars and several other currencies.
Over the weekend it emerged that some 40 Tory MPs may now be willing to sign a letter of no confidence in the Prime Minister. Earlier, reports suggested that the EU is preparing for the collapse of Brexit talks and of her Government.
Kathleen Brooks, research director at City Index, said that the headlines were stoking fears of a leadership challenge before the year-end.
“Today’s move tells us that the markets are on alert for political risks emanating out of the UK, and if there is a party coup to replace Theresa May then political turbulence is likely to weigh on the pound further,” she said.
Hussein Sayed, chief market strategist at FXTM, said that the news “creates much frustration amongst investors seeking clarity on Brexit negotiations”.
“With May’s position being potentially at risk and no significant progress after six rounds of talks with EU, sterling may come under increased pressure in the next couple of days,” he said.
The pound remains around 10 per cent lower against the dollar since June 2016’s Brexit vote, but has been stabilising somewhat in recent months.
Since the start of this year it’s actually risen by around 6 per cent against the US currency, but over the longer term forecasters and strategists expect any recovery to be capped by uncertainty.
“’Bumping along the bottom’ remains our best guess of what sterling will do from here,” strategists at French bank Societe Generale wrote in a note to clients.
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