LONDON Sterling was volatile on Tuesday after falling to a near three-week low against the US dollar on Tuesday, with investors on edge a day after British Prime Minister Boris Johnson survived a confidence vote that left him politically weakened.
Johnson won the vote by 211 votes to 148, seeing off a challenge to his leadership brought by lawmakers from his Conservative Party. But the larger than anticipated rebellion leaves him battling to win back the confidence of his colleagues and the public.
Heightened political uncertainty dealt sterling, one of this year’s worst performing major currencies, a fresh blow.
Having risen on Monday, the British currency fell 0.73% to its lowest level since May 19 at $1.2433 on Tuesday before trimming losses. It rose 0.40% on the day at $1.2584 at 1512 GMT as the dollar fell.
“The relief rally that lifted sterling yesterday was built around the hope that the confidence vote could draw a line under political distractions and allow the government to get on with the job in hand,” said Jane Foley, head of FX strategy at Rabobank in London.
“Instead, the scale of the rebellion will ensure a cloud remains over Johnson’s future. This suggests that political distractions remain in place and his leadership could again be tested ahead of the 2024 general election,” she added.
The currency has fallen 7% against a broadly strong dollar this year, weighed down by Britain’s dismal growth outlook, which is casting doubt on the trajectory for interest rate rises by the Bank of England.
Comments
Comments are closed.