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Forex News: Pound Drops Amid U.K. Political Uncertainty

Pound Drops Amid U.K. Political Uncertainty

05/28/2019 - 07:28:00 (RTTNews)

(RTTNews) - The pound declined against its major counterparts in the European session on Tuesday, as hopes for a no-deal Brexit increased on the possibility of replacement of Prime Minister Theresa May with a hard Brexiter.

Whoever replaces Theresa May is likely to be a Brexiteer prepared to deliver the purest form of Brexit - no deal.

Former Brexit Minister Boris Johnson is the favorite candidate, who may leave even without a deal.

Meanwhile, Conservative leadership candidate Jeremy Hunt today warned a no-deal Brexit could lead to the destruction of the party.

Speaking to BBC Radio 4's Today programme, Hunt stated that a no-deal would result in a general election which could see the Conservatives lose power.

Sentiment further dampened as U.S.-China trade worries persisted and bond yields rose on concerns over high budget deficit in Italy.

Italian concerns re-emerged after a report that the European Commission is considering to implement disciplinary procedures against Italy next week for breaking European Union debt rules.

The currency held steady against its major counterparts in the Asian session, excepting the yen.

The pound dropped to a 4-day low of 1.2654 against the greenback, from a high of 1.2702 hit at 2:45 am ET. The pound is seen finding support around the 1.25 region.

The U.K. currency depreciated to 138.29 against the yen, its weakest since January 14. Next key support for the pound is seen around the 137.00 level.

Following a high of 1.2752 touched at 2:45 am ET, the pound retreated, dropping to a 4-day low of 1.2705 against the franc. If the pound drops further, 1.25 is possibly seen as its next support level.

Data from the State Secretariat for Economic Affairs showed that Switzerland's economic growth accelerated more-than-expected in the first quarter of the year on domestic demand and foreign trade.

Gross domestic product growth doubled to 0.6 percent sequentially from a revised 0.3 percent in the fourth quarter of 2018.

The pound slid to a 4-day low of 0.8842 against the euro, after rising to 0.8806 at 2:45 am ET. The pound is poised to find support around the 0.90 region.

Data from the Federal Statistical Office showed that Germany's import price inflation slowed in April after rising in the previous month.

The import price index rose 1.4 percent year-on-year in April, slower than 1.7 percent increase in March. Economists had expected a rise of 1.6 percent.

Looking ahead, U.S. consumer sentiment index for May, S&P/Case-Shiller home price index and Federal Housing Finance Agency's house price index for March are scheduled for release in the New York session.

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