Currency Note

Theresa May rumoured to announce resignation date today

By Christopher Nye May 24th, 2019

May resignation

The pound is choppy this morning as rumours grow of a resignation date announcement from Theresa May later today, or, at the latest, by Monday. This only adds to the market uncertainty accompanying Brexit and the current European elections, as a leadership change could indicate a change in policy direction on Brexit.

Poor economic data from the Eurozone didn’t do the single currency any favours, but it is still up against sterling. The ECB’s monthly meeting notes from yesterday confirmed that interest rates would be held as they are, amid concerns around a growth rate that is slower than expected.

The dollar has weakened this morning as expectations arise that the Federal Reserve will have to cut interest rates to support the economy. Trump seems to have offered a carrot in US-China trade negotiations, saying that Huawei could be included – but this may not be popular among the public.

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GBP: Pound choppy ahead of May’s possible resignation

The pound is choppy this morning after making some recovery against the euro and the dollar. This may be due to expectations that the Prime Minister will reveal her resignation date later today.

Sterling weakened again yesterday as pressure increased for the Prime Minister to resign.

Her Withdrawal Agreement Bill had been due to be published today, so that MPs would be given “the maximum possible time to study its detail.” However, it will now not be published or debated until early June.

The PM is due to meet Chairman of the 1922 committee, Graham Brady this morning. The committee held a secret ballot on Wednesday evening on whether or not to change party rules, to allow the Prime Minister to be voted out of office with immediate effect.

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EUR: Worries over election results continue

The euro up against the pound but still under pressure, as British and Dutch voters went to the polling booths for European elections yesterday, continuing across the continent today. Fears of a Eurosceptic surge continue to worry the EU, with the volatility that they could bring.

The ECB released its monthly meeting notes yesterday at noon, in which it said that it would hold interest rates at 0%, and expected rates to remain low throughout 2019. Policymakers are concerned with slower-than-thought growth, but is holding off on economic support until it becomes clear that the last few months’ trend is long-term, rather than temporary.

Manufacturing in the eurozone contracted last month, with eurozone manufacturing PMI still failing to reach back through the crucial ceiling of 50.
German business sentiment also fell to its lowest level since 2014 – not a drastic drop, but not a positive sign nonetheless.

USD: Dollar weak as Fed could cut interest rates

The dollar is weak this morning, amid increasing expectations that the Federal Reserve may have to cut interest rates in order to support the economy, as trade tensions between the US and China continue to escalate.

Donald Trump has suggested that Huawei could be part of a trade deal, despite the US’s concerns over security. This may provide a resolution or at least reassure Chinese officials. However, it could also be seen as odd that the US would want to strike a deal with a company that they have recently blacklisted.

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