Sterling slips as pressure mounts on PM May to step down

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Sterling weakened again on Thursday as pressure mounted on Prime Minister Theresa May to name a date for her departure after a backlash over her last-ditch plans for Britain’s exit from the European Union.

May's final attempt to get colleagues' backing for a divorce deal triggered a revolt on Wednesday by some of her Brexit-supporting ministers, deepening political uncertainty in Britain and sparking another round of selling of the pound.

House of Commons leader Andrea Leadsom has resigned, and there was speculation other ministers could follow.

"In our forecasts, we assume that political risk will rise near-term, with a leadership challenge and the consequent risk that you get a more eurosceptic prime minister and consequently then, the risk of a no-deal Brexit rising," said BNP Paribas' G10 FX strategist Parisha Saimbi.

Britain's Prime Minister Theresa May. /VCG Photo

Saimbi said the bank had raised its probability forecast for a no-deal Brexit to 40 percent from 20 percent. Analysts say the risk of Britain and the EU breaking apart without a deal is rising, an event many economists say would greatly harm their economies.

The pound dropped 0.4 percent to a new 4-1/2 month low of 1.2605 U.S. dollars, before recovering some of those losses. It is the worst performing major currency in May, and so far has lost more than three percent of its value against the U.S. dollar.

Sterling fell 0.1 percent to 88.145 pence against the euro. The pound on Wednesday suffered its 13th consecutive day of losses against the single currency, its longest losing streak on record.

Nearly three years after Britain voted 52 percent to 48 percent to leave the EU, it remains unclear how, when or even if it will leave the club it joined in 1973. The current deadline to leave is October 31.

When May departs, her Conservative Party will elect a leader who is likely to want to renegotiate the deal the prime minister agreed with the EU in November, raising the chances of a confrontation with the bloc. The bookmakers' favorite to succeed May is Boris Johnson, who has said he wants a more decisive split.

Volatility in the pound has ticked higher after a period of relative calm in the currency, although investors are not expecting any major price swings in the months ahead.

Source(s): Reuters