More bad news for Sterling as EURGBP

22 May, 2019

Backlash - that would be the word used to sum up the investor reaction from the latest attempt by UK Prime Minister Theresa May to push forward her Brexit deal.

In a measure that can be conceived as an act of desperation to get her Brexit deal over the line, Theresa May will attempt for a fourth time to get her Withdrawal Agreement Bill through Parliament and has even offered MPs the option to hold a vote on another referendum – but only if they agree to her Brexit deal.

This measure of desperation from Theresa May shows how heavily the UK Prime Minister’s back is against the wall when it comes to her persistent efforts to deliver Brexit, but it is an extremely tough ask for MP’s to change their tune and agree to something that they have already rejected three times. And throwing the dice with the option of allowing MP’s the chance to vote on holding a second referendum is not considered even in the unlikely event they agree to her agreement as a realistic scenario that even the most optimistic Pound investors can buy into.

As such, the Pound is stumbling towards near-2019 lows for a currency that has already lost 2.81% in May, stands as the worst performer in the G10 and also on track to record 13-days of consecutive declines against the Euro.  

Calls for Theresa May to step down and resign are as relentless as ever, and her position as Prime Minister of the United Kingdom does appear to be a sitting duck scenario where whatever she puts forward to push Brexit through will be knocked back.

The Pound regularly shows the trend that when it shoots in one direction it’s difficult to stop that wave, and the tidal wave that is making its way through headlines that Theresa May will once again face calls to resign means that the Pound is at least heading to the 1.25 level.

Such sudden drops in valuation for the Pound is concerning news for UK holiday makers as the summer season is fast approaching, but we see the chances that the sprint higher in the EURGBP faces the risk of being stopped in its tracks by the upcoming EU elections. A lot of attention in international markets has been on both Brexit and US-China trade tensions over the past couple of weeks, but we cannot discount the likelihood that the upcoming EU elections will show further strides forward made for far-right political parties in Europe. If the election results do put question marks over the stability of the European Union in the headlights once again, this should put the brakes on the record rally in the EURGBP.

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