Losses for GBP as Theresa May’s leadership continues to divide Tory party

Conservative discontent with Theresa May’s ability as a leader was once-again weighing on the pound yesterday.

The pound is firmly in negative territory so far this morning. The GBP/EUR exchange rate has fallen -0.3% to €1.1332, while GBP/USD is down -0.6% to US$1.3991. GBP/AUD is stuck at opening levels of AU$1.7378, as is GBP/NZD at NZ$1.9208, while GBP/CAD has fallen -0.2% to C$1.7317.

Read on to see why GBP could find itself falling further into negative territory today…

What’s been happening?

Political developments weighed on the pound yesterday, with an empty data calendar unable to provide any support against downside GBP pressure.

Theresa May was once again facing a Conservative revolt over her leadership, with many of her own MPs expressing their dissatisfaction with her performance. Her former co-chief of staff and manifesto architect, Nick Timothy, even blasted the government for lacking purpose.

This exacerbated the ever-present fears that there could be another general election this year, which would cause severe disruption for the already-chaotic Brexit negotiations.

GBP/EUR was able to hold onto its opening levels yesterday, despite the political concerns weighing on the pound.

The US dollar was rebounding after solid personal consumption data, having spent many weeks steadily declining to multi-month lows, so high demand for USD had a negative effect on EUR appetite.

This kept the euro on weak form, while GBP/USD slumped as traders reacted to steady 1.5% growth in US personal consumption expenditure. While half a percentage point below the Federal Reserve’s target level, the data is strong enough to ensure that a March rate hike remains firmly on the table.

What's coming up?

While UK consumer credit and mortgage approvals figures are due shortly, markets may ignore these as Bank of England (BoE) Governor Mark Carney is due to testify before the Lord’s Economic Affairs Committee later this afternoon.

He will be answering questions on Brexit and the UK economy, so the odds are high that he will give some hints regarding the BoE’s current outlook and therefore the future direction of monetary policy.

Eurozone fourth-quarter GDP and German January consumer price data is set for release today, so there could be some strong euro gains if the figures show further strengthening in the currency bloc.

US consumer confidence data will be released this afternoon; a strong result here would further cement the odds of another interest rate hike in March and therefore force GBP/USD lower.

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.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.