CURRENCIES: Pound Plunges More Than 1% Against The Buck As May's Orderly Brexit Looks In Doubt
November 15 2018 - 7:19AM
Dow Jones News
By Mark DeCambre, MarketWatch
The British pound tanked against its main rivals on Thursday as
senior members of U.K. Prime Minister Theresa May's cabinet
resigned, signaling more turmoil and ahead for her leadership and
casting fresh doubts on an orderly exit from the European
Union.
The pound dropped to a session low of $1.2751 versus the U.S.
dollar, compared with $1.2991 late Wednesday in New York. The move
follows a period of volatility for sterling after May on Wednesday
said she secured approval from her cabinet for a plan that would
execute the exit British voters approved in a June 2016 referendum.
Sterling last fetched $1.2824.
The euro meanwhile rallied sharply higher against the U.K.
currency, buying GBP0.8821, up 1.3% from Wednesday.
However, the resignation of Brexit Secretary Dominic Raab and
Pensions Secretary Esther McVey coming less than 24 hours after May
announced cabinet backing of the deal is sending ripples through
British markets and raising questions about May's ability to hold
on to power.
On Thursday, May was met with laughter as she addressed
Parliament to lay out her Brexit plan, with audible jeers following
her comment that Britain's exit would be an orderly one. She said
the exit would be conducted "in a smooth and orderly way" at the
deadline on March 29.
Currency strategists and market participants said the
resignation of the top Brexit aide was a big blow to May.
"We think Dominic Raab's resignation is a big blow, without
question. Esther McVey's is less so, but coming on the heels of
Raab it adds to the narrative. What concerns us is how many
ministers seeing this news will be pondering if it is better to get
their resignations in now rather than wait," wrote Jordan
Rochester, currency strategist at Nomura, in a Thursday research
note.
Meanwhile, the ICE U.S. Dollar Index a measure of the U.S.
currency against a basket of six major rivals, was up 0.3%, at
97.128.
The main sticking point for critics is a hard border in Northern
Ireland. May secured approval from her cabinet for a Brexit deal
that would see the U.K. bound to the EU's customs union for years
after it formally quits the bloc in March, which has infuriated
hard-line Brexit backers.
Read: Brexit plan clears first hurdle but tough part lies ahead
(http://www.marketwatch.com/story/brexit-plan-clears-first-hurdle-but-tough-part-lies-ahead-2018-11-14)
A difficult path lies ahead for May.
Failure to secure an agreement would result in a so-called hard
Brexit. That means no deal in place to govern the U.K.'s
relationship with the bloc. The tentative plan agreed to by the
cabinet would end the free movement of labor, a key goal of Brexit
supporters.
Some critics, including hard-line Brexiteers within May's own
Conservative Party, charge that the deal fails to adequately
deliver on Brexit. And with the Conservatives lacking a majority in
the House of Commons, May's government relies on the support of
Northern Ireland's Democratic Unionist Party, which described the
text of the Brexit agreement as a "poor deal," according to the
BBC.
(END) Dow Jones Newswires
November 15, 2018 07:04 ET (12:04 GMT)
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