[vc_row][vc_column][vc_column_text]As Theresa May announced her resignation as leader of the Conservative Party the pound came under fresh pressure, with markets wary of the prospect of a hard-leaning Brexiteer winning the ensuing leadership contest.

The euro also struggled to gain ground over the course of the week thanks to the increasingly dovish outlook of the European Central Bank (ECB) and the Eurozone’s underwhelming manufacturing sector performance.

While global trade tensions persisted confidence in the outlook of the US economy took a dent thanks to another raft of weaker-than-expected domestic data.

However, as New Zealand export volumes bettered forecast in April this encouraged the New Zealand Dollar to push higher against its softened rivals.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Theresa May’s decision to step down as Prime Minister prompted renewed market anxiety over the possibility of the UK leaving the EU without a deal, driving the pound lower across the board.

The odds of a no-deal Brexit rose sharply as Boris Johnson quickly emerged as the frontrunner for the Conservative leadership, given his support for the prospect of the UK crashing out of the EU without a deal.

Political anxiety also mounted in the wake of the European Parliament elections, which saw Labour and the Conservatives suffer a major backlash from voters.

Coupled with a sharp downturn in May’s CBI reported retail sales index, which plunged from 13 to -27 on the month, investors were left with little incentive to buy into the pound.

As long as signs continue to point towards the Conservatives shifting towards a harder line on Brexit GBP exchange rates may struggle to recover their lost ground.

Friday’s net consumer credit figure could offer the pound a boost, however, if borrowing picks up on the month.
Evidence of greater resilience among UK consumers may temper the impact of ongoing political uncertainty, at least in the near term.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Yesterday’s better-than-expected UK mortgage data did little to dispel the cloud of pessimism that is hanging over Sterling, with markets reacting wearily to the prospect of several more months of political wrangling as contenders line up to fill Theresa May’s empty shoes.

Today Sterling is more or less becalmed, with GBP/EUR flat at €1.1337, GBP/USD almost unmoved at $1.2647 and GBP/CAD frozen at C$1.7071, while GBP/AUD is stuck at AU$1.8279 and GBP/NZD is similarly unmoved at NZ$1.9356.

There is no UK economic data scheduled for release today, but this afternoon will see the Bank of Canada make its latest interest rate decision, although borrowing rates are poised to remain unchanged at 1.75%.

What’s been happening?
After the bank holiday weekend, the week started off on a duff note for the pound as it struggled to make any headway following the resignation of Theresa May on Friday and then the success of the newly-minted Brexit Party in the European elections.

The euro also came under pressure on account of the weekend vote to elect MEPs, with populist and ant-EU parties making gains across the bloc. This included Italy’s League party, which looks set to be on a collision course with Brussels for breaking budget rules.

On Tuesday, US President Donald Trump concluded a four-day state visit to Japan that was meant to showcase the alliance, however the visit was overshadowed by a disagreement over the two-way trade gap, while the Canadian dollar fell as markets anticipated today’s interest rate decision.

Finally, the Australian dollar rose yesterday as risk appetite increased following some comments from Donald Trump, who seemed to suggest a breakthrough was imminent in US-China trade talks.

What’s coming up?
Sterling strength will undoubtedly remain driven by politics today, and with nothing in the way of data to steer it we can expect to see the UK currency at the mercy of its rivals. For the euro, there will be some data in the form of French inflation and GDP figures, as well as German unemployment data.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

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