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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Pound plunges as Raab resigns

10:37 15 November 2018

Summary:

  • Brexit minister Raab resigns

  • PM May losing support of her cabinet with Mcvey also stepping down

  • GBP drops sharply across the board; Retail sales also miss

 

There’s been a sharp move lower in the pound in the last half an hour after Brexit minister Dominic Raab has announced his resignation. Sterling fell by almost 1% in a matter of minutes on the news and the announcement is reminiscent of the chequers deal in the summer where initial support from the cabinet has proved short lived for Theresa May. The announcement is a major blow for May and others will likely follow suit in offering their resignations with her position now growing increasingly tenuous. Not long afterwards fellow cabinet member Esther McVey also stepped down. 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.

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Unsurprisingly there’s been a swoon in sterling with the currency lower by more than 1% against all of its major peers. The biggest gains can be seen in the AUD and JPY with both higher by more than 2% vs GBP. Source: xStation

 

Given these dramatic events on the political front, economic data is of secondary importance at present. Having said that the earlier release of retail sales will have done little to help the plight of the pound with an unexpected drop of 0.5% in M/M terms. This was below the +0.2% expected and even though the prior reading of -0.8% was revised up to -0.4% it still doesn’t look good. The core reading was similarly bad with a M/M drop of 0.4% vs +0.2% expected. The prior was also revised higher form -0.8% previously to -0.3%.  

Retail sales and the core reading (ex-auto and fuel) have both pulled back of late in a concerning sign for UK consumer spending. Source: XTB Macrobond

 

The bigger picture for the pound looks pretty negative following this with the GBPUSD dropping to its lowest level of the week. Prior support around 1.2660 now could be seen as key and if the market breaks below there then a move back to the post-referendum lows around 1.20 (and possibly even lower) could lie ahead.

After a heavy wave of selling the GBPUSD has drifted back towards recent support at 1.2660. Should price drop below here then a move to 1.20 is possible. Source: xStation

 

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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