Sterling falls as Theresa May clings to power despite cabinet mutiny over Brexit deal
The pound has fallen sharply this morning as Prime Minister Theresa May comes under huge pressure to resign over the coming days following a cabinet revolt.
Read more: Andrea Leadsom quits Cabinet with stinging attack on May's Brexit plan
Sterling had dropped 0.4 per cent against the dollar by 8.30am, to buy $1.261, its lowest value since 4 January.
May's woes are set to worsen today as Britain heads to the polls to vote in a European election that is expected to see Nigel Farage's Brexit party trounce the Conservatives.
The currency jumped briefly on Tuesday after May laid out a tweaked Brexit proposal that would let MPs vote on a second referendum. Investors warmed to the possibility of Britain remaining in the European Union.
However, these gains were quickly reversed and intensified yesterday as a cabinet mutiny mounted.
Leader of the House Andrea Leadsom tendered her resignation last night, saying she could not support a bill that contained a proposal to let MPs vote on a second referendum.
Rumours that May would imminently resign under pressure from her own ministers swirled yesterday, while this morning newspapers reported that she will step down tomorrow.
The pound had fallen 0.3 per cent to a fresh four-month low against the euro by 8.30am, to buy €1.132.
Driving the pound downwards is the prospect of a new PM who might lead the country to a no-deal Brexit.
Connor Campbell, financial analyst at Spreadex, said: “With Britons heading to the polls for a European Election vote that is expected to see the Brexit party sweep to victory, and Theresa May barely clinging on to her job… the pound’s depression only worsened on Thursday.”
“Sinking half a percent against the dollar, cable is now the wrong side of $1.261 for the first time since 3 January,” he said.
A fall in the value of sterling is bad news for holidaymakers who will have to pay higher exchange rates for foreign currencies. It will also make importing goods from abroad more expensive, pushing up the prices Britons pay in the shops.
A cheaper pound makes UK exports cheaper, however, which is good for Britain’s exporters.
Read more: May pressures MPs to pass her Brexit deal – again
Yet the FTSE 100 had fallen 0.8 per cent this morning to 7,278.65 as investors mulled growing trade tensions and the prospect of a chaotic Brexit.