The British pound gave up some of its early gains against the US dollar and the euro on Thursday as investors remained concerned about the political stability of the British cabinet. Economic data in the United Kingdom added to the pressure on the British currency as home prices rose less than what analysts had previously expected.
A number of recent scandals delivered a powerful blow to Prime Minister Theresa Mayâs cabinet over the past week. A sudden resignation by Secretary of State for Defense Michael Fallon was revealed to be due to an allegation that followed a list of other similar incidents.
Back in 2003, Fallon reportedly attempted to force himself on a journalist, who decided to contact Downing Street after she became aware that other similar allegations were made against him. The incident appears to have been the tipping point for Mayâs cabinet, leading to Fallonâs resignation shortly after the journalist first shared the incident with Downing Street.
Soon after, reports of a second scandal emerged as International Development Secretary Priti Patel hid crucial information from the British prime minister. Patel, who had a call with May on Monday to tell her everything she previously kept secret, still failed to disclose two meetings that she had with Israeli officials. Patel admitted her actions in the wake of these reports and followed that with a resignation from Mayâs cabinet.
Investors now anticipate Mayâs choice for Patelâs replacement. The current government seems to stand divided after the prime minister began her cabinet with a balanced mix of secretaries who support Brexit and who do not. This means that the person May will choose as a replacement for Patel will signal the level of unification that the prime minister is after for her Brexit cabinet.
The British pound further weakened today as data from the Royal Institution of Chartered Surveyors showed that house prices grew at a slower pace in October. House prices rose 1% last month following a 6% gain in September, while analysts forecasted a 4% increase.
The smaller gain stemmed from lower home prices in four regions in the United Kingdom, while four other regions saw higher prices. The data came with a negative outlook for house prices in the short term, with further declines expected in six regions.
GBP/USD traded at 1.3127 at 11:25 GMT on Thursday after rising to 1.3148 at 06:45 GMT, the pairâs highest level for the day. GBP/USD began trading today at 1.3111 before reaching a low point of 1.3087 at 09:25 GMT.
EUR/GBP rose to 0.8860 after touching 0.8869 at 10:25 GMT, a level last seen on November 6. EUR/GBP started the day at 0.8836.
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