The British pound continues to rise even though Theresa May’s chief Brexit negotiator David Davis has resigned. The euro sceptics in her cabinet are not happy with what they see as a “weak” Brexit plan that she is pushing.
Is Boris Johnston next to go, or will Brexit bring down Theresa May?
You would expect that this political calamity would hit sterling hard but that has not been the case, so far. Sterling continues to rise and moved up about 50 pips in early trading on Monday, post Davis resignation.
Understanding the push and pull of currencies is never clear cut.
The Brexit calamity is seen as a negative, however buyer are giving more weight to a weak dollar due to Trump’s ongoing trade wars (positive for GBPUSD) and an expectation that the Bank of England will increase interest rates in August (also, positive for GBPUSD).
Sometimes, when we have a big pull and push on either side of a currency pair it’s best to just follow the price or give that pair a wide berth until its starts making sense.
More resignation in May’s cabinet over the next few days could be the trigger for the buyers to give up.
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