LONDON — The pound is heading for its worst week of losses since the “flash crash” in October last year, with analysts blaming UK politics for the poor performance.
Sterling is down 0.3% against the dollar to $US1.3073 at 8.55 a.m. BST (3.55 a.m. ET), a one-month low. At the same time, the pound is down 0.1% against the euro to €1.1184.
The pound is now on track to lose over 2% against the dollar this week and the Financial Times reports that this is set to make it the worse week since last year’s flash crash.
Analysts are blaming the poor performance on the Conservative Party Conference, held at the start of the week, which inspired negative headlines about the ruling party and has sparked a plot to oust Prime Minister Theresa May. The latest on Friday is that former party chairman Grant Shapps has emerged as the leader of the plot.
“The sharp depreciation of the British Pound continues to reflect the growing concerns about the Conservative Party leadership, following May’s poorly received keynote speech on Wednesday,” Lukman Otunuga, a research analyst at FXTM, said in an email on Friday morning.
Connor Campbell, a financial analyst at SpreadEx, said: “While on Thursday there was a web of reasons why the pound was driven lower, this Friday’s decline seems to have a more singular reason behind it: Tory infighting.
“Another Tory leadership battle would be seriously bruising for the pound, especially since, at the moment, there is no real clear — or, at least, market-preferred — candidate to replace May.”
Nomura says in a strategy note sent to clients on Thursday: “If we see headlines of Theresa May’s resignation, we’d expect the pound to suffer and quickly. Nonetheless, if Tory rebels look to the long game, we think it’s too early to push for that resignation and we’ll go back to trading the BoE and upcoming EU negotiations, both of which may present upside surprises versus low market expectations.”