From the dizzy heights of €1.14 from the lows of €1.07 just a few weeks ago, the pound was always going to be vulnerable to being knocked off its Bank of England built pedestal. Enter stage left, the Prime Minister.
At the Conservative Party Conference in Manchester, Theresa May was inspired by the prospect of galvanising her cabinet, her party and her government. Sadly her speech was riddled with headline grabbing gaffes that had nothing to do with policy.
A prankster delivering a handwritten P45 apparently signed by the PM-in-waiting Boris Johnson didn’t knock her off her stride. But then along came a case of a badly timed frog in the throat that disrupted her patter and distracted from the message she was delivering.
Strong and stable, or weak and weakening? The press have been giving her a hard time and anyone can lose their voice, but it doesn’t make them worse at their job. However, it reinforced a pattern of blunders and the spluttering at Wednesday’s gathering is acting as a metaphor to Mrs May’s ability to run this country. With rumours of cabinet ministers and backbenchers clambering over themselves to call for her resignation, the market isn’t oblivious to the political uncertainty that has been with us since June’s General Election.
We’ll finish the week around €1.10, which isn’t too bad considering hopes of a bounce from a potential interest rate hike the closer we get to the Bank of England’s next meeting in November. The real question is can the economy – already stuttering – cope with another general election if Theresa May decides to fall on her sword? The knives are certainly out, and with the already protracted Brexit negotiations going terribly at best, the next few months could be a rollercoaster, which will not provide support to the fragile pound.
Advising what to do is an impossible task, but I’m absolute advocate of protecting yourself. The sharks are circling in Downing Street, and it would seem that it’s only a matter of time before there’s blood in the water. The pound suffering and Boris Johnson as Prime Minister? Where’s my passport?!
Written by Luke Travail, senior currency trader at torfx