Sterling slipped on Monday thanks to a group of Conservative members of parliament agreeing to sign a letter of non-confidence in Prime Minister Theresa May’s ability to lead Britain out of the European Union.
The pound has dropped by 0.72% against the dollar and 0.66% against the euro. The fall illustrated how sensitive the British currency is to bearish news and perceived political risks.
The pound fell 1.5% at the beginning of November following an increase in interest rates by the Bank of England. The rate hike was the first in a decade, however the statement by the BOE suggested a more dovish tone going forward.
The weaker pound was not enough to support London’s FTSE 100, which dipped by 0.17% on Monday, although the softer sterling did cushion the index’s fall.
May’s stability as a leader was brought into question in June, when the Tories lost the majority in parliament. Many have disagreed with the Prime Minister’s tight deadline to depart from the EU, set at 11 p.m. on March 29, 2019 (London time)
Keir Starmer, Labour member, noted in a letter to May on Monday, “Over recent weeks, it has become increasingly clear that you alone do not have the authority to deliver a transitional deal with Europe and to take the necessary steps to protect jobs and the economy,” Starmer urged the Prime Minister to secure a two-year transition deal that would allow Britain to stay in the single market and customs union after the cut off date of 2019.
Companies are pleading for certainty and may grow weary of waiting, relocating to different hubs around Europe to shelter themselves from potential risks.