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Pound slides on fears over May’s future


British Pound banknotes at a money exchange shop. The pound plunged more than six percent to a fresh 31-year low against the dollar on October 7, 2016, its latest slump after Britain firmed up details on the timing of its exit from the European Union / AFP PHOTO / YASSER AL-ZAYYAT

The British pound sank Monday on uncertainty surrounding Prime Minister Theresa May’s future, but the London stock market was buoyed by the sliding currency, dealers said.

Sterling faced selling pressure on reports that dozens of MPs in the ruling Conservative Party were backing a move to oust May, whose leadership has been battered by a string of scandals and crises.

“The potential of a Tory vote of no confidence in Theresa May has pushed the pound lower this morning, helping raise the FTSE off its lows,” said IG analyst Joshua Mahony.


“With a slow start to the week expected amid a dearth of economic releases, the potential for yet another political upheaval in the UK has no doubt grabbed market attention.”

The Sunday Times reported that 40 Conservative lawmakers have agreed to sign a letter of no confidence in the prime minister, just eight short of the number needed to trigger a leadership contest.

In morning London deals, the pound fell sharply to $1.3074, while the European single currency advanced to 89.05 pence.

London’s benchmark FTSE 100 index of blue-chip firms rose as the weaker pound lifted share prices of multinationals.

Other European stock markets dipped, after Asian indices endured a broadly negative session following a recent rally to multi-year highs.

Two British cabinet ministers have been forced to resign in recent weeks — one over sexual harassment and the other for a series of unauthorised meetings with Israeli officials — weakening May’s leadership.

Questions over May’s future come as a secret letter emerged from two cabinet ministers instructing her how to run Brexit.

The leaked memo from Foreign Secretary Boris Johnson and Environment Secretary Michael Gove, two top Brexit advocates, told May to ensure other ministers back the process by “clarifying their minds”.

The government is under pressure to meet a two-week deadline set by the EU’s chief Brexit negotiator Michel Barnier on Friday for a deal on exit terms ahead of the December EU summit.

– ‘Critical juncture’ –
“Clearly the Brexit negotiations are at a crucial juncture,” noted Rabobank analyst Jane Foley.

“However without a majority May’s leadership has been weakened and she appears unable to rally her cabinet behind her.”

May’s authority was already damaged by last year’s snap general election, in which she lost her parliamentary majority.

In recent weeks, many major world markets have surged — with Wall Street hitting several records and Tokyo touching 26-year highs — on optimism about the global economy and a series of strong corporate earnings.

But investors have started to cash in as worries begin to emerge about high share valuations, while there are also fears about Donald Trump’s much-vaunted tax cuts as US lawmakers struggle to agree a deal.

– Key figures around 1100 GMT –
Pound/dollar: DOWN at $1.3074 from $1.3193 at 2200 GMT Friday

Euro/pound: UP at 89.05 pence from 88.42 pence

Euro/dollar: UP at $1.1642 from $1.1665

Dollar/yen: DOWN at 113.35 yen from 113.50 yen

London – FTSE 100: UP 0.2 percent at 7,447.55 points

Frankfurt – DAX 30: DOWN 0.1 percent at 13,114.70

Paris – CAC 40: DOWN 0.2 percent at 5,369.16

EURO STOXX 50: DOWN 0.1 percent at 3,589.68

Tokyo – Nikkei 225: DOWN 1.3 percent at 22,380.99 (close)

Hong Kong – Hang Seng: UP 0.2 percent at 29,182.18 (close)

Shanghai – Composite: UP 0.4 percent at 3,447.84 (close)

New York – DOW: DOWN 0.2 percent at 23,422.21 (close)

Oil – Brent North Sea: DOWN 20 cents at $63.32 per barrel

Oil – West Texas Intermediate: DOWN four cents at $56.70

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