Pound Falls as Brexit Tensions Rise, Conservative Lead Narrows

  • Theresa May’s lead drops as opposition Labour climbs in polls
  • Brexit Secretary Davis threatens that U.K. will quit EU talks

U.K. Party Leaders Slam May's 'Extreme' Brexit

The pound fell below $1.30 after the U.K. hardened its Brexit rhetoric and polls predicted a narrower-than-expected win for Prime Minister Theresa May in June elections.

Sterling weakened against all its major peers as the latest Opinium Research survey showed the opposition Labour Party cutting May’s Conservative Party lead to 13 points from 15 points a week earlier. A YouGov survey in the Sunday Times put Jeremy Corbyn’s party nine points behind, the first time it has had a single-digit gap since September. The British currency also declined after Brexit Secretary David Davis said the U.K. will quit talks with the European Union if the bill for exiting the bloc exceeds 100 billion euros ($112 billion).

“Opinion polls show a sharp narrowing in the Conservative lead, from a huge 19 percent to sizeable 9 percent, while warnings that the U.K. could walk away from an exit deal if the final exit bill is too big don’t encourage optimism about negotiations that start in earnest after the U.K. election on June 8,” said Kit Juckes, London-based strategist at Societe Generale SA in a client note. He added that “shorts in GBP/CAD and GBP/NOK are a better bet for now.”

The pound fell 0.5 percent to $1.2974 as of 8:39 a.m. in London. The pair broke above the crucial $1.30 mark last week, reaching the highest since September, and closed above that level on Friday. Sterling weakened 0.2 percent versus the euro.

  • GBP/USD -- Resistance at 1.3048-59, May 18, Sept. 29 high, and support at 1.2927, May 19 low
  • Cable “finds more sellers than buyers above the $1.30,” writes Ipek Ozkardeskaya, a strategist at London Capital Group 
    • “There could be a further stagnation followed by a pullback, if the 1.3044 (major 38.2% retrace on post-Brexit selloff) is not successfully broken. Some traders are willing to build tactical short positions on the pound before the June 8 general election”
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