The British pound was subjected to market jitters on Monday after the country’s Foreign Secretary dramatically quit.
Prime Minister Theresa May had spent the weekend and late last week seeking approval for her approach to the complex Brexit negotiations.
But after first suffering the loss of Brexit Secretary David Davis, she was then also hit with news of the resignation of Boris Johnson on Monday afternoon. It is believed that Johnson’s move could well push MPs in the Conservative Party into launching a backbench rebellion against May, meaning a new Prime Minister could be on the cards.
The pound declined following the news of the resignations, but it also stabilised somewhat after Davis released a less strident statement than expected. The resignations to some extent also had the opposite effect, and it is believed that part of the pound’s relative stability over the day lay in the fact that the departure from government of two of the most anti-EU politicians in parliament may well lead to a less harsh Brexit – the outcome preferred by many markets.
Elsewhere in the forex trading markets, the US dollar found itself continuing to experience weakness despite a recent run of good luck.
The EUR/USD pair rose at the start of trading yesterday as the common currency capitalised effectively on the weak dollar.
The dollar also didn’t manage to surge ahead in the USD/JPY pair. It moved between a tiny range of 110.30 to 110.55 as floors opened yesterday.
The Australian dollar had more luck than the yen, and there was a rise of around 0.7% between AUD/USD.
And despite the American imposition of tariffs on imported Chinese goods and the retaliation from China, the Chinese yuan has managed to perform well. Predictions that the Chinese yuan would survive the tariffs were tentatively proven correct after it conquered the US dollar and the pair entered the 0.7470-80 region of the chart.
Looking ahead to the rest of this week, there’s still plenty to keep the forex markets busy.
The fast-moving political situation in Britain is likely to continue to evolve, which may have an impact on the pound. In Britain, May is expected to attempt to hold on to her authority in the face of continued political turmoil and difficulties surrounding Brexit. In the event she is replaced by politicians from her own party, her successor would become Prime Minister without a country-wide election, which would intensify calls to hold a national poll and could put the pound further at risk.
All sorts of major economic data releases are also scheduled for this week.
In the US, Thursday will see both a consumer price index release as well as some joblessness statistics released on the same day.
Over the border in Canada, meanwhile, there’ll be an interest rate decision by the Bank of Canada on Wednesday.
Smaller releases, such as a food price index statement in New Zealand, are also on the cards.