Pound exchange rates initially founds some support this morning following the resignation of Brexit secretary David Davis. This week was always set to be dominated by British politics with Mrs Davis quittting late on Sunday night, saying Theresa May had “given away too much too easily”.
A successor for Mr Davis has already been found with the appointment of Dominic Raab as Brexit secretary. Mr Raab, who is currently housing minister, was a prominent Leave campaigner during the 2016 referendum.
Ordinarily with a prominent figure leaving an already fragile government you would have expected the pound to have fallen. However, in this instance, we were to to the reverse with GBP/EUR pushing as high as 1.1350 and GBP/USD peaking at 1.3362, up from last weeks lows of 1.31. Many would argue that Mr Davis leaving is not a huge surprise, however what maybe came as more shocking to the market was the resignation of Boris Johnson.
The resignation of two senior members of Theresa Mays government has now called into question her authority with many believing she is likley to face a challenge to her position. Following the news of resignation of Mr Johnson the pound was to fall as low as 1.1270 against the Euro and 1.3235 against the US dollar.
What now for the Pound?
A lot for me will depend on whether Theresa May is able to win back the confidence of her cabinet. Questions are already being asked as to whether she will face a challenge to her position. Should this happen then this brings back into the equation the real possibility of a “hard Brexit” something Theresa May has been actively trying to avoid. If May can hold onto power and her plan gains traction and becomes a realistic solution then we could actually see the pound gain further support against a number of currencies this week.
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