The pound rose on 0.15% against the dollar over the weekend, having regained some ground on the back of Theresa May’s departure. It was at a four-month low on of $1.26 on Thursday but the prospect of a “no deal” Brexit seems to have become the key point of contention between new leadership contenders. The markets have recently been pricing in the increased likelihood of a pro-Brexit Prime Minister taking the country down the route of a hard Brexit as more potential leaders explained their varying Brexit plans.
The EU election results in the UK saw Nigel Farage’s Brexit Party emerge victorious, with the results showing them as the largest party. The Liberal Democrats and Green Party also made gains with the two main parties suffering from their worst ever results. Although the vote was polarised between parties supporting remaining in the EU through a 2nd referendum and those wanting a hard Brexit, both sides are claiming victory. Markets moved very quickly back to focus on the Conservative Party leadership contest the following morning.
GBPUSD opened at 1.2675 and rose to 1.2726 in the wake of Theresa May’s resignation. On Sunday night it jumped on the back of initial election results showing stronger than expected gains for pro-EU liberals and greens in a few countries. As the markets turned their attention back the leadership race on Monday, the pair slipped back down to close at 1.2680
GBPEUR followed a similar pattern with gains and losses being less pronounced. The pair ended Friday on 1.1345 and jumped to 1.1376 on initial results, before falling back down to close yesterday at 1.1330
The EU elections across the rest of the continent also saw pro-European parties maintain control over the 28-member bloc, limiting the gains made by nationalist and far-right opponents, which were also mitigated by a rise in liberal and green parties committed to maintaining the strength of the union. The euro had briefly gained on the back of elections results but slipped back down 0.1% against the dollar in early trading this morning.
With no overly dramatic results emerging from the EU elections, investors moved swiftly back to US trade negotiations. The dollar was up 0.2% against a basket of peers early this morning but remains a bit below the two-year high it hit on Thursday.
President Donald Trump is currently visiting Japan where he said that the two countries will be “announcing some things, probably in August, that will be very good for both countries”. Although the Japanese yen was 0.2% up against the dollar, analysts are still sceptical that these measures are going to solve Japan’s large trade surplus with the United States.
EURUSD opened at 1.1188 on Friday before rising across the day to hit 1.1205. The pair was largely unmoved over the weekend, gaining only slightly on Sunday evening before dropping again on Monday to close at 1.1191