The pound falls to a fresh four-month low

22.05.2019 16:44|Conotoxia Ltd Analyst Team

Another day of systematic depreciation of the British currency might be taking place. The pound is the worst performer among the world`s major currencies. Several days of depreciation are impressive, especially as the pound weakens both in relation to the US dollar or the euro.

Today the pound falls to a fresh four-month low. This is due to the increase in speculation that British ministers may ask Prime Minister Theresa May for resignation because her latest Brexit proposal has little chance of being supported by the British Parliament. The market may, therefore, price the end of May's leadership.

In the afternoon, Jeremy Corbyn, the leader of the Labour Party, repeated his call for general election. He also said that in conversations with Theresa May it was clear that there was no way to ensure that her successor as prime minister would respect the proposals she made. Prime Minister Theresa May has no intention of surrendering so easily, although she is under constant pressure to abandon the Brexit agreement and resign. As she says herself, it is her duty to put a new plan to vote. This vote is to take place in the first week of June, and by that time politicians should be persuaded to support it.

It seems that investors are already preparing for another political chaos in the UK, which may be expressed by the increase in the expected volatility within a month. The implied volatility for monthly options has risen to the highest level in two weeks, which in short means the cost of hedging against possible high volatility in the British pound in this term.

We will follow with great attention the further political fate of Prime Minister Theresa May, as well as the Brexit plan, because these events are still having a key impact on the British pound. Today also inflation data did not help, which showed the highest rise in inflation from 4 months (2.1%), but were below market expectations at 2.2%, which could also affect the pound.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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