Sterling fell on Wednesday and was heading for its longest ever losing streak against the euro, though some of these losses were clawed back after reports that Theresa May was going to resign imminently. The compounding effect of her deal being extremely unlikely to pass and the uncertainty of whether the Prime Minister would stay or go caused the pound to fall by 0.6% against the dollar at one stage. The evening did see the resignation of Andrea Leadsom, Leader of The House of Commons, citing a lack of confidence in the party leadership to deliver Brexit.
Overall sterling fell 0.25% against the euro and traders have interpreted this as the pound moving to price in a no-deal scenario under a more Eurosceptic Prime Minister such as Conservative frontrunner Boris Johnson. The pound is now on it’s the 13th day of consecutive losses against the euro and a fall of another 2-3% is possible in the “worst case scenario” according to some analysts.
Today’s EU elections will likely see Nigel Farage’s Brexit Party perform far better than the Conservatives and this has furthered fuelled concerns of a no deal Brexit with some banks such as JP Morgan changing their probability analysis from 25% to 50%.
GBPUSD opened at 1.2667 and fell across the day to a low of 1.2634 in the afternoon, and picked up again on rumours of May’s resignation, closing at 1.2675
GBPEUR opened at 1.1382 and similarly fell to a low of 1.1319 and quickly picked up again to close at 1.1361
The dollar held near a one-month high on Wednesday after the May Federal Open Market Committee meeting came to the agreement that a patient approach to monetary policy could be the prevailing attitude “for some time”. They do not believe a rate change in either direction is necessary and that a rate hike in 2019 is unlikely despite the US economy growing with minimal inflation. The dollar was steady against a basket of rivals.
Safe-haven assets still gained on the dollar, with the Swiss franc up 0.17% and the Japanese yen up 0.2%. The effects of a flare-up of trade tensions between the US and China have not yet subsided, investors in riskier assets were relieved at the easing of restrictions on Chinese technology giant Huawei.
EURUSD opened at 1.1152 and reached a high of 1.1176 close to midday. The pair lost most of this ground in the afternoon and closed almost unchanged at 1.1157