No confidence in Theresa

24 October, 2018

Nakhil Mahra

The Pound has recovered against most currencies during October compared to its recent low levels at the beginning of the month. However that seems to now have peaked, with Brexit talks last week finishing a stalemate with major issues still to be resolved and no clear breakthrough in sight. The biggest stumbling block halting Sterling’s gains is the position of the PM, with reports suggesting she is close to the threshold required for a vote of no confidence.

This is enough to keep the Pound under pressure and limit any positive movements until Mrs May can rally the support she needs. “While a leadership challenge may no longer be imminent, it remains at an elevated risk, which is placing the Pound under downward pressure in the near-term. The Brexit mood music remains negative for the Pound, which could fall more sharply if a leadership challenge materialises in the coming months,”. This is how one of the leading analysts at ING bank described the current situation, suggesting any breakout to 1.15 and above seems unlikely at this moment in time.

Yesterday the Pound fell further, losing half a cent on both the Euro and USD from the days’ peak levels, closing on a two week low. With no data from the UK for the rest of the week, the negative could continue with a heavy raft of both US and Europe data to come before the weekend. Most notably, Mario Draghi speaking Friday lunchtime. Known to be bullish about the Euro, could we see mid-market levels at 1.11 before we start the weekend? If that is a risk you are looking to avoid then why not take advantage of our forward contracts. With the November summit now cancelled and scheduled for December, there will be a further period of uncertainty. The currency markets need stability to make gains, with the Pound struggling in that aspect, how low will we see the Pound go?