Pound to Suffer Worst Day of Trade in Over a Year as GBP Exchange Rates Hammered by Brexit Chaos

GBP Exchange Rates Slump as No-Confidence Vote Looks Likely

UPDATE: The Pound (GBP) is currently on track for its largest one-day fall in over a year, with GBP/EUR and GBP/USD both down roughly 1.6% amid suggestions that Tory rebels already have the numbers needed to trigger a vote of no-confidence in Theresa May.

Rumours are also swirling of other possible cabinet departures, with both Transport Secretary Chris Grayling and International Development Secretary Penny Mordaunt tipped to resign by the end of the day.

However until these are made official the focus for GBP investors will likely be on a press conference from Theresa May scheduled for 17:00 GMT.

GBP Exchange Rates Nosedive as Raab Resigns in Protest at Draft Brexit Deal

Pound Sterling (GBP) exchange rates are plummeting across the board today as markets digest the news that Dominic Raab has resigned from his position as Brexit Secretary.

At the time of writing GBP has fallen over 1% in trade so far against a basket of currencies this morning, with losses in GBP/EUR reaching 1.3% and GBP/USD having slumping 1.4%.

Against other currencies, GBP/ZAR lost over 2%, GBP/AUD was down 1.8% and GBP/NZD off 1.6%.

Pound (GBP) Exchange Rates Rocked by Cabinet Resignations

The Pound (GBP) is in freefall this morning, having registered losses of at least 1% against all of its major currency peers as the backlash to a draft Brexit deal had resulted in two cabinet resignations at the time of writing.

Theresa May announced late on Wednesday that following a five-hour meeting she had managed to secure the backing from her Cabinet for the UK’s draft Brexit agreement with the EU, reports of which helped Sterling to stabilise overnight after a chaotic day of trade.

However it was thought that while the deal passed, several members of the cabinet remained in opposition to the agreement.

This appeared to have been confirmed this morning as two of her Cabinet resigned in protest.

First up and having the most dramatic impact on Sterling was the resignation of Brexit Secretary Dominic Raab, as he stated that he could not ‘in good conscience support the terms proposed for our deal with the EU.’

Raab’s resignation was quickly followed by the resignation of the Work and Pensions Secretary, Esther McVey, with the pro-Brexit minister arguing that Theresa May has ‘gone from no deal is better than a bad deal, to any deal is better than no deal.’

The resignations have added further fuel to speculation that Theresa May could face a vote of no confidence from Conservative backbenchers as the backlash against the deal continues to growth.

Such an outcome could jeopardise the chances of an emergency EU summit later this month as  president of the European Council, Donald Tusk confirmed that a summit will take place on 25 November so long as ‘nothing extraordinary happens’.

GBP Forecast: So What Next for Brexit and the Pound?

Looking forward, the recent volatility in the Pound (GBP) looks set carry through to the end of this week’s session and it’s likely to continue through to next week as well.

While there is the possibility for Sterling to rally, recent developments would suggest that the downside risks currently outweigh upsides for GBP, likely leading GBP exchange rates to sink even lower in the coming days, with a Parliamentary vote on the deal likely to be the next major flashpoint for the Pound.

Looking a little further ahead ING have been taking a look at the possible political outcomes and how they may impact the Pound US Dollar (GBP/USD) exchange rate over the next few months.

Ultimately as EU’s chief negotiator, Michel Barnier stated on Wednesday following the announcement that the UK cabinet had signed off on the deal, the ‘path is still long’ and its likely this will be reflected in volatility in GBP exchange rates over the coming months.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail