Pound Falls As Theresa May Set to Resign on June 7, Later Recovers

The British pound today fell from daily highs after the British Prime Minister Theresa May announced that she would step down on June 7 from her post as party leader. Her decision took investors by surprise given that she had stood her ground before in the face of fierce opposition from within her party and the opposition for a long time.
The GBP/USD currency pair today fell from a daily high of 1.2718 in the early European session to a low of 1.2647 following the announcement, but had since recovered most of its losses.
The currency pair opened today’s session trading in a tight sideways range before rallying higher in the early European session driven by investor sentiment. The pair’s initial rally was largely driven US dollar dynamics following yesterday’s disappointing US manufacturing data, which showed the sector drop to 5 year lows. The release of upbeat UK retail sales data for April by the Office for National Statistics also contributed to the pair’s rally. Headline UK retail sales remained flat versus the expected 0.4% decline, while core retail sales also beat expectations. The pair rallied to daily highs after Theresa May announced that she would depart on June 7.
The cable later fell as markets digested the news and the likelihood of a no-deal Brexit increased as Boris Johnson emerged as a leading candidate to replace PM May as Conservative Party leader.
The currency pair’s performance over the upcoming weekend is likely to be affected by UK political headlines.
The GBP/USD currency pair was trading at 1.2708 as at 16:37 GMT having recovered from a low of 1.2647. The GBP/JPY currency pair was trading at 139.03 having risen from a low of 138.48.

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