This morning Prime Minister Theresa May declared her resignation date as the 7th of June. The pound had fallen further early yesterday but began to pick up and continued to do so this morning in early trading ahead of her widely anticipated resignation speech. Yesterday’s losses had seen sterling fall 0.1% against the euro, marking 13 days of consecutive losses against the single currency, the longest losing streak on record.
It is expected that the next Prime Minister will be one that originally voted to leave the EU and will take a harder line on Brexit, fears in Europe that the UK will be more likely to leave without deal may force the EU to offer more concessions such as excluding the Northern Ireland back stop, a major contributor to Theresa May’s deal failing three times to gain parliamentary approval.
However, investors will be mindful if a Brexiteer is elected to take over, there will be calls for a general election and if the Labour party choose Remain in their manifesto, it effectively creates a second referendum.
Results for EU elections are expected on Sunday, with the main parties likely to suffer and the Brexit Party and Liberal Democrats expected to make gains, partly contributing to May decision to quit.
GBPUSD opened yesterday at 1.2610 and rose across the day, closing at a high of 1.2675 on the news in the afternoon that Theresa May’s resignation was imminent
GBPEUR opened at 1.1320 and followed a similar pattern during the day however the gains were erased in the evening to conclude another day of losses against the euro, closing at 1.1336
The US dollar hit a two-year high on Thursday but erased these gains following weak domestic data and the threat of economic fall out from the trade war. Against six major rivals, the dollar was down 0.16%. The sale of US single-family homes fell from in April and manufacturing activity hit its lowest level in almost a decade in May, suggesting a sharp slowdown in economic growth was in progress. Some of this lost momentum in economic growth has come from the US-China trade war which investors believe is undermining confidence.
Activity in Germany’s services and manufacturing sectors dropped in May according to data released yesterday, further highlighting that trade disputes are having knock-on effects on Europe’s largest economy, the euro’s stability will be in question over the next few days before the full results of the EU elections across the continent become known. Safe-have currencies like the Swiss franc and the Japanese yen were up 0.72% and 0.64% respectively.