Pound Faces Fresh Headwinds as U.K. Political Limbo Is Prolonged
- Sterling adds to Friday’s losses that followed election result
- Risk reversals show stiff premium to protect against losses
Nomura's Dragicevich Says Softer Brexit Supports Sterling
The pound looked set to be buffeted by fresh headwinds on Monday after U.K. Prime Minister Theresa May’s efforts of clinging to power through a loose political alliance suffered a setback.
The currency slumped against most major currencies on Friday after May’s Conservative Party lost a parliamentary majority in Thursday’s election. Over the weekend, May’s office was forced to admit that it hadn’t, after all, reached a deal to govern with the support of Northern Ireland’s Democratic Unionist Party, hours after announcing that it had. Even as some investors argued that the election result will put the brakes on a hard Brexit, ultimately supporting the pound, the prolonged political uncertainty is expected to keep the currency under pressure in coming weeks or months.