Sterling volatility at extremes as May achieves cabinet approval
Yesterday’s trading session was a memorable one for the Great British Pound, which saw it essentially close the day where it started but with a huge chunk of volatility in between. The rumours of plots and resignations were rife yesterday as PM May first took prime ministers questions in Parliament and then sat her cabinet down for a meeting which lasted over 5 hours. Sterling gyrated in line with both positive and negative headlines which surfaced across the day. Tory big hitters Rees-Mogg and Boris Johnson were first up to rubbish the prime minister’s deal, calling upon their fellow MPs to vote against it. Further on in the day, and just as the cabinet meeting began, rumours of cabinet minister resignations crossed the wires, all while sterling was playing a game of yo-yo with itself. Finally, just before 8pm Theresa May confronted journalists outside No. 10 and confirmed she had the support of her cabinet. GBP rallied hard but ran into sellers within the $1.30 handle. It appears the pressure is now on for her to win over fellow Tories. However, one thing is certainly clear, she’ll need the support of some Labour MPs in order to get this deal through Parliament. It’s expected a vote would take place in the Commons and then the Lords before year-end.
Yesterday also saw softer inflation readings from both the UK and US. As expected, the UK’s softer report took a backseat to all the Brexit drama which was taking place in Westminster. One final data release awaits sterling today – October retail sales will be reported this morning at 0930. The same report will be released from the US at 1330 and will likely have more impact across financial markets, especially in light of the next expected rate hike from the Fed in December. Levels to watch on the upside for the pound are $1.3080 and €1.1550. If these remain strong resistance then it could be a sign that optimism is diminishing over a potential deal to be passed.
Written by Vivek Savani. 11:37am, November 15th 2018
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