Pound Sterling has fallen in value today by 1.5 cents to $1.283 – lowest level in November so far – due to a combination of Dollar strength and further Brexit concerns.
The Independent newspaper earlier reported that Prime Minister Theresa May had cancelled a cabinet meeting specially arranged to discuss Brexit today, with Jo Johnson’s resignation on Friday considered the spanner in the works of her attempts to bridge the gap between the two sides of the Conservative Party.
The Euro has also started the day off poorly, hitting its lowest levels since June 2017. Analysts have dubbed the combination of Brexit, Italy’s debt dispute with the ECB, slower growth forecasts, and Central Bank caution in general as the ‘four apocalyptic horsemen’ with European currencies and markets currently seen as vulnerable by investors.
Euro Slides to 16-Month Low, Pound Sinks as EU Risks Reignite pic.twitter.com/y8l1DWj6lT
— Alex Goncalves (@alexdgn) November 12, 2018
In response to the cheaper Pound, gold has rallied slightly, gaining £4.71 per ounce today. At its peak it hit £940.74 mid-morning before US markets opened, at which point its valuation fell back slightly.
Sterling lost out on Friday as Jo Johnson, brother of Boris Johnson and Minister for Transport and London, resigned his position in the cabinet, citing his disagreement with the PM and the direction of Brexit towards no-deal as the reason behind his decision. In response, GBP lost 0.7% to fall to $1.2973 by the end of the trading day.
Trade-weighted sterling is now more or less where it was in the days after the Brexit vote. pic.twitter.com/8IcS7k1HjC
— Andy Bruce (@BruceReuters) November 12, 2018
The current headache for Theresa May is how to meet the two sides of her party in the middle, with Boris Johnson and Jacob Rees-Mogg on one side demanding a hard Brexit, and Anna Soubry, Justine Greening, and Jo Johnson on the other insisting the UK remains in Europe.
The resignation of Jo Johnson, just like his brother, highlights a lack of confidence in the Prime Minister to resolve matters and reach an acceptable outcome, which in turn is making investors more cautious at a time when the UK economy is only just keeping its head above water.
Fraser Nelson of The Spectator argues that Jo Johnson’s resignation, while unsettling the cabinet and backbenches, removes another obstacle towards a Hard Brexit, making his brother’s goal more achievable.
Upshot of Jo Johnson’s resignation: ‘no deal’ is more likely. It’s currently the default, MPs need to agree on something to replace it. If moderate Remainers like JoJo join Soubryites in voting down May’s plan (as do 50+ members of BoJo StandUp4Brexit crew) default kicks in
— Fraser Nelson (@FraserNelson) November 10, 2018
Dominic Raab, the Secretary of State for Exiting the European Union, hasn’t helped the UK Government’s woes either, with a blunder at a recent speech to a tech conference. In his speech, Mr Raab said he didn’t quite realise how important the Dover-Calais shipping route was for the UK’s import/export purposes.
Frictionless realisations from Dominic Raab (via @Jack_Blanchard_) pic.twitter.com/u72PCN20G0
— Sebastian Payne (@SebastianEPayne) November 8, 2018
Despite the drop in Pound and Euro values, the two currencies have stayed in step rather than one gaining ground on the other, suggesting that the US Dollar boost ahead of an expected interest rate rise in the US next month is more to blame for this morning’s poor performance rather than being Brexit-led. Whereas the Euro hit a 16-month low today, the US Dollar hit a 16-month high, with investors favouring action stateside rather than on the continent.