Pound falters as Brexit despair mounts among investorsDevdiscourse News Desk | Updated: 17-05-2019 20:52 IST | Created: 17-05-2019 14:22 IST
Sterling traded below $1.28 on Friday, close to its four-month low, as cross-party Brexit talks neared collapse and pressure mounted on Prime Minister Theresa May to resign. Brexit talks between May's Conservatives and the opposition Labour Party are about to end without an agreement, the BBC reported. Earlier, May had agreed to set out a timetable for her departure in early June. Sterling was down 0.1% on Friday at $1.2785, near its February low of $1.2773. It had dropped to a three-month low earlier this week and dipped below $1.28 on Thursday,
"The economic fundamentals have lent a hand to sterling in recent months, but the news that Brexit talks are breaking down: no one knows what that means for the path forward," said Neil Mellor, senior currency strategist at BNY Mellon. "The next target will surely be February low and then potentially into the low $1.20s if nothing is resolved." A Conservative leadership battle appears inevitable and the risks of a no-deal Brexit -- or no Brexit at all -- is growing along with the possibility of a general election and, potentially, a Labour government.
"The market doesn't like elections at the best of times, and given it has a natural capitalist orientation, it's not a surprise it worries over this Labour government," said Mellor. On Thursday, the head of Britain's National Grid criticised Labour's plans to re-nationalise energy networks, saying that would increase costs for consumers and might prompt legal challenges.
Next week's European parliamentary vote is another cause for concern, with Nigel Farage's Brexit Party on course to pick up 34% of the vote, more than the Conservative and Labour parties combined.