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The Pound Is Being Held Hostage by Politics Again

Oct 24 • Morning Roll Call • 76 Views • No Comments

(Bloomberg) – As if the drawn-out Brexit uncertainty wasn’t enough, the pound is now at risk from the battle over the U.K.’s leadership.

Investors are watching for signs whether a much-anticipated challenge to U.K. Prime Minister Theresa May will actually materialize, and the outcome of a meeting of Conservative Party backbenchers Wednesday could be crucial. Long-time sterling bull Nomura International Plc switched to a neutral stance Monday, recommending a flat position amid reports of mounting opposition to May from within her own party.

While sterling gained Tuesday on optimism the European Union is preparing to offer a solution for the Irish border issue, political risk could yet set the currency back, according to Credit Agricole SA and Nomura. The prospect of a leadership threat has reappeared on traders’ radar since the weekend press reported that the number of lawmakers rallying against May was approaching the number required to officially mount a challenge.

“Any indication that political risks are on the rise in Westminster could fuel fears about a ‘no-deal’ Brexit and sink the pound,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole. “While we still hope for a last-minute Brexit deal, we maintain a rather cautious stance on the pound for now.”

ECONOMIC CALENDAR EVENTS FOR OCTOBER 24th 

EUR M3 Money Supply (3m)
EUR Private loans (YoY)
EUR M3 Money Supply (YoY)
EUR Markit PMI Composite
EUR Markit Manufacturing PMI
EUR Markit Services PMI
GBP BBA Mortgage Approvals
EUR Trade Balance non-EU
USD MBA Mortgage Applications
USD Housing Price Index (MoM)
EUR Leading Indicator
USD Markit Manufacturing PMI
USD Markit Services PMI
USD Markit PMI Composite
USD New Home Sales (MoM)
USD New Home Sales Change (MoM)
CAD Bank of Canada Monetary Policy Report REPORT
CAD BoC Interest Rate Decision
CAD BoC Rate Statement REPORT
USD EIA Crude Oil Stocks change
CAD BoC Press Conference SPEECH
USD Fed’s Bullard speech SPEECH
USD 5-Year Note Auction
USD FOMC Member Bostic speech SPEECH
USD FOMC Member Mester speech SPEECH
USD Fed’s Beige Book

 

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