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Pound falls below $1.31 as pressure mounts on Theresa May over Brexit - business live Pound falls below $1.31 as pressure mounts on Theresa May over Brexit - business live
(35 minutes later)
The latest UK political tensions will not have gone unnoticed in Europe.
Any weakening of Theresa May’s position fuels concern that the PM might struggle to get support for her Brexit plans, or even be ousted from office before March 2019.
Over in Berlin, German government spokesman Steffen Seibert has warned that the situation is now urgent.
Seibert told reporters (via Reuters) that:
More progress is required as time is ticking.
It is understandable that the (EU) chief negotiator (Michel) Barnier stresses how urgent it is for Britain to act promptly, to make proposals.”
Deputy Finance Minister Thomas Steffen has also weighed in, saying people should be prepared for a ‘no deal’ Brexit....
Senior German finance ministry offical Thomas Steffen has warned "we should all be prepared" for a no deal Brexit scenario but says he hopes for alternative "but today I do not see it"
Newsflash: Convenience chain Nisa has agreed to be taken over by the Co-op, following a vote by its storeowners.Newsflash: Convenience chain Nisa has agreed to be taken over by the Co-op, following a vote by its storeowners.
But the vote was close. The Co-op needed to get 75% support, and it barely squeaked over the line at a meeting at Leeds United football club...But the vote was close. The Co-op needed to get 75% support, and it barely squeaked over the line at a meeting at Leeds United football club...
Co-op successful in its offer for Nisa.Co-op successful in its offer for Nisa.
Looks like Co-op has clinched its Nisa takeover . 75.8% of members have voted in favourLooks like Co-op has clinched its Nisa takeover . 75.8% of members have voted in favour
Some Nisa members had argued against the deal, worried that it would damage their independence (as we reported this morning).Some Nisa members had argued against the deal, worried that it would damage their independence (as we reported this morning).
Last Friday, the Brexit negotiations intensified another notch when EU negotiator Michel Barnier set the British government a two-week deadline to clarity its position on its ‘exit bill’.Last Friday, the Brexit negotiations intensified another notch when EU negotiator Michel Barnier set the British government a two-week deadline to clarity its position on its ‘exit bill’.
MPs will get the chance to grill Brexit secretary David Davis about the situation later today, when he gives a statement to the House of Commons.MPs will get the chance to grill Brexit secretary David Davis about the situation later today, when he gives a statement to the House of Commons.
My colleague Andrew Sparrow is covering events in parliament here:My colleague Andrew Sparrow is covering events in parliament here:
Here’s another chart from the Resolution Foundation’s Budget pre-briefing, predicting the worst wage squeeze since shortly after the Battle of Waterloo:Here’s another chart from the Resolution Foundation’s Budget pre-briefing, predicting the worst wage squeeze since shortly after the Battle of Waterloo:
Resolution say chancellor Hammond could help the situation, by cutting the cap on public sector pay rises.Resolution say chancellor Hammond could help the situation, by cutting the cap on public sector pay rises.
Here are their four priorities for next week’s Budget:Here are their four priorities for next week’s Budget:
Housing, going well beyond the additional Help-to-Buy funding already trailed. The government should take advantage of today’s ultra-low borrowing costs to embark on a large-scale programme of state investment in housebuilding – revising the fiscal rules to allow this to happenHousing, going well beyond the additional Help-to-Buy funding already trailed. The government should take advantage of today’s ultra-low borrowing costs to embark on a large-scale programme of state investment in housebuilding – revising the fiscal rules to allow this to happen
Revising social security plans, not only to shorten the six week wait in Universal Credit but to also reverse cuts to the new benefit and undo a deeper than expected benefit freezeRevising social security plans, not only to shorten the six week wait in Universal Credit but to also reverse cuts to the new benefit and undo a deeper than expected benefit freeze
Supporting the ending of the public sector pay cap with additional resources – especially for the NHSSupporting the ending of the public sector pay cap with additional resources – especially for the NHS
Ending the expensive and regressive policy of raising income tax thresholds now that the goal of a £12,500 personal allowance is within sight, instead raising revenues via freezes to income tax thresholds later this parliamentEnding the expensive and regressive policy of raising income tax thresholds now that the goal of a £12,500 personal allowance is within sight, instead raising revenues via freezes to income tax thresholds later this parliament
Investors have been jolted out of their ‘autumnal slumber’ by the latest outbreak of infighting in the UK cabinet, and the loss of two senior ministers (Priti Patel and Sir Michael Fallon) this month.Investors have been jolted out of their ‘autumnal slumber’ by the latest outbreak of infighting in the UK cabinet, and the loss of two senior ministers (Priti Patel and Sir Michael Fallon) this month.
So says Kathleen Brooks of City index, who points out that sterling volatility has jumped today.So says Kathleen Brooks of City index, who points out that sterling volatility has jumped today.
She writes:She writes:
Firstly, today’s move tells us that the markets are on alert for political risks emanating out of the UK, and if there is a party coup to replace Theresa May then political turbulence is likely to weigh on the pound further.Firstly, today’s move tells us that the markets are on alert for political risks emanating out of the UK, and if there is a party coup to replace Theresa May then political turbulence is likely to weigh on the pound further.
Secondly, even though the pound has had a jolty start to the week, volatility and technical signals do not suggest to us that the pound is about to fall off a cliff just yet, we may need this story to develop further to get another big move lower in sterling.Secondly, even though the pound has had a jolty start to the week, volatility and technical signals do not suggest to us that the pound is about to fall off a cliff just yet, we may need this story to develop further to get another big move lower in sterling.
Thirdly, don’t get too complacent about the pound, the political and Brexit situations remain fluid and can throw up surprises. In future, when volatility is low in the pound investors should be on their guard that a pullback is likely.Thirdly, don’t get too complacent about the pound, the political and Brexit situations remain fluid and can throw up surprises. In future, when volatility is low in the pound investors should be on their guard that a pullback is likely.
This chart from Reuters’s Jamie McGeever highlights how the pound has become more volatile, compared to the euro:This chart from Reuters’s Jamie McGeever highlights how the pound has become more volatile, compared to the euro:
UK political chaos seeping into sterling - UK pound most volatile relative to euro since May. Chart shows spread between 1-month GBP/USD and EUR/USD implied vol, widest since May. pic.twitter.com/ZWc9xBuAKEUK political chaos seeping into sterling - UK pound most volatile relative to euro since May. Chart shows spread between 1-month GBP/USD and EUR/USD implied vol, widest since May. pic.twitter.com/ZWc9xBuAKE
As if the UK government didn’t have enough on its plate already, Philip Hammond has a budget to prepare.As if the UK government didn’t have enough on its plate already, Philip Hammond has a budget to prepare.
And it may be a depressing event.And it may be a depressing event.
The Resolution Foundation have just published a new report, warning that UK productivity will probably be revised down next week (the budget is on Thursday).The Resolution Foundation have just published a new report, warning that UK productivity will probably be revised down next week (the budget is on Thursday).
That will make a dent in the public finances - it means lower growth, and thus less progress in cutting the UK’s deficit.That will make a dent in the public finances - it means lower growth, and thus less progress in cutting the UK’s deficit.
But Resolution also warn that it will hurt households in the pocket, as weak productivity means less chance of significant wage increases.But Resolution also warn that it will hurt households in the pocket, as weak productivity means less chance of significant wage increases.
Matt Whittaker, Chief Economist at the Resolution Foundation, said:Matt Whittaker, Chief Economist at the Resolution Foundation, said:
“Budget day looks set to bring bad news about what we have the potential to produce as a country. It looks likely that we are currently living through the worst decade for productivity growth since the start of the 19th century.“Budget day looks set to bring bad news about what we have the potential to produce as a country. It looks likely that we are currently living through the worst decade for productivity growth since the start of the 19th century.
Highlights from @resfoundation Budget forecast:UK on course for worst productivity growth in decade to 2017 since Napoleon tried to invade Russia Britain on course for worst decade on pay growth for 200 yearsHighlights from @resfoundation Budget forecast:UK on course for worst productivity growth in decade to 2017 since Napoleon tried to invade Russia Britain on course for worst decade on pay growth for 200 years
Resolution reckons that weekly pay will be almost £25 lower in 2022 than previously expected, still £22.70 below the pre-crisis peak.Resolution reckons that weekly pay will be almost £25 lower in 2022 than previously expected, still £22.70 below the pre-crisis peak.
Here’s a chart from their report:Here’s a chart from their report:
Here’s some good news for people affected by the ground rent scandal: One of Britain’s biggest housebuilders, Taylor Wimpey, has set aside £130m in April to deal with the issue.Here’s some good news for people affected by the ground rent scandal: One of Britain’s biggest housebuilders, Taylor Wimpey, has set aside £130m in April to deal with the issue.
Some buyers of its new-build leasehold properties have found themselves trapped in spiralling ground rent contracts, with ground rents doubling every ten years.Some buyers of its new-build leasehold properties have found themselves trapped in spiralling ground rent contracts, with ground rents doubling every ten years.
The housebuilder said today it had reached agreements with freeholders to enable the “substantial majority” of its customers with a ten-year doubling lease to switch to inflation-based increases.The housebuilder said today it had reached agreements with freeholders to enable the “substantial majority” of its customers with a ten-year doubling lease to switch to inflation-based increases.
Ground rents will go back to their original level before they started doubling plus retail price index inflation, currently running at 3.9%. They will be reviewed every ten years in line with RPI inflation. The £130m will go to freeholders.Ground rents will go back to their original level before they started doubling plus retail price index inflation, currently running at 3.9%. They will be reviewed every ten years in line with RPI inflation. The £130m will go to freeholders.
Taylor Wimpey said:Taylor Wimpey said:
“Converting to an RPI based structure addresses concerns about the mortgageability and saleability of these properties. We continue to make good progress towards securing agreements with other freeholders to also enable the conversion of the remaining doubling ground rent leases.”“Converting to an RPI based structure addresses concerns about the mortgageability and saleability of these properties. We continue to make good progress towards securing agreements with other freeholders to also enable the conversion of the remaining doubling ground rent leases.”
The selloff is picking up pace as the ructions in the UK government worries the markets.The selloff is picking up pace as the ructions in the UK government worries the markets.
Sterling is now down 1.25 cents or almost 1% at $1.3066. That’s a one-week low, but also close to its lowest point since early September.Sterling is now down 1.25 cents or almost 1% at $1.3066. That’s a one-week low, but also close to its lowest point since early September.
Rebecca O’Keeffe, head of investing at interactive investor, says the pound is suffering from the mounting pressure on Theresa May who is “struggling to maintain her grip on power”.Rebecca O’Keeffe, head of investing at interactive investor, says the pound is suffering from the mounting pressure on Theresa May who is “struggling to maintain her grip on power”.
Kit Juckes of Societe Generale has now fired over his latest note to clients, outlining why he thinks the current turmoil is generally priced in.Kit Juckes of Societe Generale has now fired over his latest note to clients, outlining why he thinks the current turmoil is generally priced in.
Sterling is priced for soggy growth and difficult negotiations. Both are likely whoever runs the Conservatives. The weakness of the PM’s position, like the incompetence of Mr Bean, is well known. That’s before we wonder who would want her job in the current circumstances; and before we wonder what her departure might do to the odds of another election, which might well put Jeremy Corbyn into Downing Street.Sterling is priced for soggy growth and difficult negotiations. Both are likely whoever runs the Conservatives. The weakness of the PM’s position, like the incompetence of Mr Bean, is well known. That’s before we wonder who would want her job in the current circumstances; and before we wonder what her departure might do to the odds of another election, which might well put Jeremy Corbyn into Downing Street.
And would that be good for sterling (much softer Brexit) or bad for sterling (left-wing Labour hasn’t been around since the pound’s worst decade of all)?And would that be good for sterling (much softer Brexit) or bad for sterling (left-wing Labour hasn’t been around since the pound’s worst decade of all)?
Newsflash: The International Monetary Fund has warned that Europe’s economy would suffer if the UK left the EU without a deal.Newsflash: The International Monetary Fund has warned that Europe’s economy would suffer if the UK left the EU without a deal.
IMF official Joerg Decressin told Reuters that a hard Brexit would cause damage on both sides of the channel:IMF official Joerg Decressin told Reuters that a hard Brexit would cause damage on both sides of the channel:
“Under such circumstances, our concern is that economic growth will suffer, especially in the UK, but also the euro area.“Under such circumstances, our concern is that economic growth will suffer, especially in the UK, but also the euro area.
We are then possibly looking at appreciably lower growth than we presently project.”We are then possibly looking at appreciably lower growth than we presently project.”
Decressin was speaking after the IMF released its latest assessment of the European economy. It believes the recovery looks increasingly assured, with Europe expected to grow by 2.4% this year (although the UK may only manage 1.7%....)Decressin was speaking after the IMF released its latest assessment of the European economy. It believes the recovery looks increasingly assured, with Europe expected to grow by 2.4% this year (although the UK may only manage 1.7%....)
Economic growth in #Europe is expected at 2.4% in 2017, with all countries in the region growing. https://t.co/SZu7Pfqz2p pic.twitter.com/HliDWDvTQ6Economic growth in #Europe is expected at 2.4% in 2017, with all countries in the region growing. https://t.co/SZu7Pfqz2p pic.twitter.com/HliDWDvTQ6
City traders are studying the headlines and concluding that Theresa May is at her weakest position since June’s general election, says Connor Campbell of SpreadEx.City traders are studying the headlines and concluding that Theresa May is at her weakest position since June’s general election, says Connor Campbell of SpreadEx.
He writes:He writes:
There’s A LOT for May to fret about at the moment. She could be facing defeat on part of her Brexit Bill later in the week, with Tory Remainers likely to team up with Labour to try and secure Parliament a meaningful vote on any deal with the EU, something the PM is keen to avoid.There’s A LOT for May to fret about at the moment. She could be facing defeat on part of her Brexit Bill later in the week, with Tory Remainers likely to team up with Labour to try and secure Parliament a meaningful vote on any deal with the EU, something the PM is keen to avoid.
There’s also threats from Michel Barnier – who stated at the weekend the EU was preparing for a ‘no deal’ scenario – that if Britain doesn’t spell out how far it intends to ‘honour its obligations’ within the next 2 weeks then any trade talks will have to be ‘put back’.There’s also threats from Michel Barnier – who stated at the weekend the EU was preparing for a ‘no deal’ scenario – that if Britain doesn’t spell out how far it intends to ‘honour its obligations’ within the next 2 weeks then any trade talks will have to be ‘put back’.
Finally, there’s the leaked ‘Orwellian’ letter from Michael Gove and Boris Johnson – back to scheming after last year’s Tory leadership falling out – to May, with the prominent Leaver MPs outlining a series of secret Brexit demands.Finally, there’s the leaked ‘Orwellian’ letter from Michael Gove and Boris Johnson – back to scheming after last year’s Tory leadership falling out – to May, with the prominent Leaver MPs outlining a series of secret Brexit demands.
The pound is also losing ground against the euro, down almost one euro cent at €1.122.The pound is also losing ground against the euro, down almost one euro cent at €1.122.
The weaker pound has pushed up share prices in London (as it makes overseas earnings more valuable).The weaker pound has pushed up share prices in London (as it makes overseas earnings more valuable).
The FTSE 100 has gained 22 points, or 0.3%, to 7455 points.The FTSE 100 has gained 22 points, or 0.3%, to 7455 points.
This is the pound’s biggest fall in a week, according to Bloomberg.This is the pound’s biggest fall in a week, according to Bloomberg.
They say:They say:
Sterling fell as much as 0.8 percent to $1.3092 as leveraged accounts aggressively sold the currency, according to traders in London, who asked not to be identified as they weren’t authorized to speak publicly.Sterling fell as much as 0.8 percent to $1.3092 as leveraged accounts aggressively sold the currency, according to traders in London, who asked not to be identified as they weren’t authorized to speak publicly.
Here’s a chart showing how the pound dropped this morning:Here’s a chart showing how the pound dropped this morning:
Hussein Sayed, chief market strategist at FXTM, says sterling is suffering from Theresa May’s weak position:Hussein Sayed, chief market strategist at FXTM, says sterling is suffering from Theresa May’s weak position:
Sterling fell more than 0.5% early Monday, after the Sunday Times reported yesterday that 40 Conservative Party MPs agreed to sign a letter of no confidence in the Prime Minister, Theresa May. While this remains short of the 48 votes needed to force a new leadership, it still creates much frustration amongst investors seeking clarity on Brexit negotiations.Sterling fell more than 0.5% early Monday, after the Sunday Times reported yesterday that 40 Conservative Party MPs agreed to sign a letter of no confidence in the Prime Minister, Theresa May. While this remains short of the 48 votes needed to force a new leadership, it still creates much frustration amongst investors seeking clarity on Brexit negotiations.
With May’s position being potentially at risk and no significant progress after six rounds of talks with EU, Sterling may come under increased pressure in the next couple of days, with the $1.3024 support level at risk of being breached. A leaked letter from Boris Johnson and Michael Gove pushing for Hard Brexit, add to the uncertainty as House of Commons meet on Tuesday.With May’s position being potentially at risk and no significant progress after six rounds of talks with EU, Sterling may come under increased pressure in the next couple of days, with the $1.3024 support level at risk of being breached. A leaked letter from Boris Johnson and Michael Gove pushing for Hard Brexit, add to the uncertainty as House of Commons meet on Tuesday.
But....Elsa Lignos of Royal Bank of Canada suggests Tory MPs will be reluctant to oust May, given the opposition Labour party’s solid performance in the polls...But....Elsa Lignos of Royal Bank of Canada suggests Tory MPs will be reluctant to oust May, given the opposition Labour party’s solid performance in the polls...
We have argued before that UK political risk is underpriced (bookies odds point to a high probability of an election in 2018 or 2019, with Corbyn as the single most likely next prime minister). But note there were 35 MPs ready to sign a no confidence letter after May’s chaotic party conference speech and the hurdle to be MP number 47 or 48 should be high, given Labour’s performance in the polls.We have argued before that UK political risk is underpriced (bookies odds point to a high probability of an election in 2018 or 2019, with Corbyn as the single most likely next prime minister). But note there were 35 MPs ready to sign a no confidence letter after May’s chaotic party conference speech and the hurdle to be MP number 47 or 48 should be high, given Labour’s performance in the polls.
The pound is still down 10% compared to its value before the EU referendum (when it was worth almost $1.50).The pound is still down 10% compared to its value before the EU referendum (when it was worth almost $1.50).
Kit Juckes of French bank Societe Generale tweets:Kit Juckes of French bank Societe Generale tweets:
Markets ended last week with a risk wobble as EM and HY spreads widened and Govt yields rose. This morning, all about 40 MPs losing confidence in T May. £ down. But U.K. govt shambles is mostly priced in & change can be good.Markets ended last week with a risk wobble as EM and HY spreads widened and Govt yields rose. This morning, all about 40 MPs losing confidence in T May. £ down. But U.K. govt shambles is mostly priced in & change can be good.
(EM = emerging markets, HY = high yield, or riskier bonds that give a better return. The rest doesn’t require translation....)(EM = emerging markets, HY = high yield, or riskier bonds that give a better return. The rest doesn’t require translation....)
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The pound has fallen this morning as pressure mounts on prime minister Theresa May over Britain’s exit from the European Union, ahead of some crucial votes in parliament this week.The pound has fallen this morning as pressure mounts on prime minister Theresa May over Britain’s exit from the European Union, ahead of some crucial votes in parliament this week.
Sterling has shed almost a cent this morning, to below $1.31, after the Sunday Times reported that 40 Conservative members of Parliament have agreed to sign a letter of no confidence in her.Sterling has shed almost a cent this morning, to below $1.31, after the Sunday Times reported that 40 Conservative members of Parliament have agreed to sign a letter of no confidence in her.
That’s close to the number needed to trigger a formal leadership battle, creating new jitters in the City and beyond about the stability of the UK government.That’s close to the number needed to trigger a formal leadership battle, creating new jitters in the City and beyond about the stability of the UK government.
The British pound falls after news reports that members of Parliament want Theresa May to resign https://t.co/SkvSE606BB pic.twitter.com/JzYAlix7W5The British pound falls after news reports that members of Parliament want Theresa May to resign https://t.co/SkvSE606BB pic.twitter.com/JzYAlix7W5
In another significant move, foreign secretary Boris Johnson and environment secretary Michael Gove have written a letter to May complaining that “some parts of Government” aren’t doing enough to prepare for a hard Brexit.In another significant move, foreign secretary Boris Johnson and environment secretary Michael Gove have written a letter to May complaining that “some parts of Government” aren’t doing enough to prepare for a hard Brexit.
This letter, which leaked over the weekend, appears to be an attempt to undermine chancellor Philip Hammond (as he puts the finishing touches to next week’s budget).This letter, which leaked over the weekend, appears to be an attempt to undermine chancellor Philip Hammond (as he puts the finishing touches to next week’s budget).
GUARDIAN: Brexiteers send PM ‘Orwellian’ set of demands #tomorrowspaperstoday pic.twitter.com/M5tkspLrFGGUARDIAN: Brexiteers send PM ‘Orwellian’ set of demands #tomorrowspaperstoday pic.twitter.com/M5tkspLrFG
One minister has described the move as “Orwellian”, suggesting that the cabinet is badly split as MPs return to parliament to debate the Brexit bill.One minister has described the move as “Orwellian”, suggesting that the cabinet is badly split as MPs return to parliament to debate the Brexit bill.
My colleagues Rajeev Syal and Jon Henley report:My colleagues Rajeev Syal and Jon Henley report:
Another minister said: “I doubt they thought this would ever come out. It stinks to high heaven. May will have to dress them down or look weak.”Another minister said: “I doubt they thought this would ever come out. It stinks to high heaven. May will have to dress them down or look weak.”
Another former cabinet minister said: “I can’t believe this has come out. This is exactly the kind of arm-twisting by Brexiters one expects to go on behind the scenes, but the fact that it is in the public and is being inflicted upon the prime minister is remarkable.”Another former cabinet minister said: “I can’t believe this has come out. This is exactly the kind of arm-twisting by Brexiters one expects to go on behind the scenes, but the fact that it is in the public and is being inflicted upon the prime minister is remarkable.”
It all tees up another dramatic week, with parliament due to start debating the EU withdrawal bill again on Tuesday. There will be fireworks, with a group of MPs planning to propose an amendment to give Parliament a binding vote on the final divorce deal between Britain and the EU.....It all tees up another dramatic week, with parliament due to start debating the EU withdrawal bill again on Tuesday. There will be fireworks, with a group of MPs planning to propose an amendment to give Parliament a binding vote on the final divorce deal between Britain and the EU.....
Also coming up today...Also coming up today...
Bookmaker Ladbrokes and housebuilder Taylor Wimpey are reporting results this morning.Bookmaker Ladbrokes and housebuilder Taylor Wimpey are reporting results this morning.
We’ll also keep an eye on the Dubai Air Show - yesterday, Emirates announced a $15bn deal with Boeing. That was a surprise, as Airbus was expected to win a big deal for its Airbus A380 superjumbo - can it bounce back today?We’ll also keep an eye on the Dubai Air Show - yesterday, Emirates announced a $15bn deal with Boeing. That was a surprise, as Airbus was expected to win a big deal for its Airbus A380 superjumbo - can it bounce back today?