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Pound suffers worst day since 2016 after cabinet resignations leave Theresa May's future in doubt

Sterling drops more than 1 per cent against both dollar and euro

Ben Chapman
Thursday 15 November 2018 10:31 GMT
Theresa May says cabinet has agreed draft Brexit withdrawal agreement

The pound has suffered its worst day against the dollar since 2016 following the resignation of two members of Theresa May's cabinet.

Sterling slumped more than 1.8 per cent against both the dollar and the euro, after Brexit secretary Domic Raab and work and pensions secretary Esther Mcvey both stepped down saying the could not back the deal.

Political turmoil mounted on Thursday morning just hours after a Brexit deal had supposedly received "collective" support from the cabinet.

The resignations blew a hole in the theory that Theresa May had managed to unify her top team around the deal and plunged the prime minister's future into doubt.

The pound fell 1.9 per cent against the dollar at $1.2745, its worst performance since 27 June 2016 - foure days after the Brexit vote. Sterling was down 2 per cent down against the euro at €1.1256.

The UK currency had fallen slowly before the resignations while the FTSE 100 was broadly flat as markets greeted news of the Brexit deal with caution.

However, the shares of UK-focused firms were pounded as political uncertainty increased throughout the day.

Housebuilders were especially hard hit, with Persimmon and Taylor Wimpey down 9 per cent and 8.6 per cent respectively.

Jeremy Thomson-Cook, Chief economist at WorldFirst said: "All eyes are now on Theresa May with a challenge to her leadership increasingly being viewed as the next catalyst for another sterling collapse."

Mr Raab announced his decision to step down on Twitter saying: “Today, I have resigned as Brexit Secretary. I cannot in good conscience support the terms proposed for our deal with the EU.”

Ms McVey cited concerns over the future of the Union and the lack of control over money, law, borders and trade policy.

Mr Raab and Ms McVey's dramatic resignations will plunge Ms May's leadership into fresh crisis, and come barely an hour after Northern Ireland minister Shailesh Vara also decided to quit in protest at the Brexit deal.

David Cheetham, chief market analyst at XTB, predicted that other ministers would also offer their resignations making Ms May's position "increasingly tenuous.

"It now seems probable that a vote of no confidence will be tabled, with some reports stating that the requisite 48 letters will be sent by lunchtime," he said.

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"Unsurprisingly there’s been a swoon in sterling with the currency lower by more than 1 per cent against all of its major peers.

"So far there’s been minimal reaction seen in the stock market with the FTSE rising a little in recent trade to move up to its highest level of the day."

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