Boris for PM? Tory infighting sends pound lower

The pound recorded notable losses against many of the majors on Monday thanks to a combination of poor UK data and political concerns.

GBP/EUR hit a low of €1.1282 before recovering to €1.1317, GBP/USD drifted from $1.3359 to $1.3240, GBP/AUD slumped from A$1.7092 to A$1.6935, GBP/NZD lost over a cent to fall from NZ$1.8584 to NZ$1.8410 and GBP/CAD eased to C$1.6566.

What left the pound weaker yesterday? Read on to find out…

What’s been happening?

It’s a bit of an understatement to say that the pound had a poor start to the week.

The British currency spent Monday being kicked lower by most of its peers as the UK’s manufacturing PMI fell short of forecasts. The index slid from 56.7 to 55.9, adding to concerns about UK economic output.

Markit economist Rob Dobson said of the result; ‘Although it looks as if the sector made solid progress through the third quarter as a whole, the growth slowdown in September is a further sign that momentum is being lost across the broader UK economy.’

Further Sterling losses occurred as a result of speculation that Boris Johnson may have plans to contest Theresa May’s leadership of the Conservative party.

Boris has come under fire for undermining May’s position by setting out four ‘red lines’ that won’t be crossed in Brexit negotiations, lines which don’t correlate with the official cabinet positions highlighted by May.

While the pound was down in the dumps on Monday, the euro and US dollar were both able to benefit from positive domestic news. The common currency was lifted by a report detailing a 6-year high in manufacturing output while the GBP/USD exchange rate slumped to a three-week low in response to a 13-year high US manufacturing ISM.

What's coming up?

The pound could prove reactive to the Conservative party conference today, particularly if there are signs that May is losing support.

The UK is also set to publish its construction PMI for September. The gauge doesn’t usually have too much impact on the pound due to the fact that the construction sector accounts for such a small percentage of total GDP, but another below-forecast reading may see the pound consolidate losses today.

Further pound movement could be caused by the release of the Bank of England’s (BoE) record of September’s Financial Policy Committee meeting.

Influential news from elsewhere is in fairly short supply today, so domestic developments will be the main cause of GBP exchange rate movement.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.