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Pound falls as Brexit uncertainty rises Volatile pound regains some ground
(about 1 hour later)
The pound has fallen against the dollar amid political uncertainty as Prime Minister Theresa May struggles to broker an agreement on Brexit with her cabinet. The pound has rebounded in afternoon trading in response to a report that the main elements of a Brexit treaty text are ready to present to the UK cabinet on Tuesday.
In early trading, sterling fell nearly 1% against the dollar to $1.2845. Sterling regained some ground after a Financial Times report cited the EU's main Brexit negotiator, Michel Barnier.
Against the euro, it was down 0.2% at €1.1422. The pound turned positive against the euro, up 0.17% on the day at €1.1466.
Analysts said the fall was partly a reaction to the latest news concerning Brexit talks, but also reflected a stronger dollar. Against the dollar, it recovered partially to stand 0.43% lower at $1.2918.
Mrs May is trying to rally support among cabinet ministers for her Brexit proposal in time for a hoped-for summit in Brussels later this month.Mrs May is trying to rally support among cabinet ministers for her Brexit proposal in time for a hoped-for summit in Brussels later this month.
British Pound against US DollarBritish Pound against US Dollar
However, media reports suggest that her efforts have been delayed by increasing disarray in her cabinet over the issue. However, the pound sagged in morning trading amid indications that her efforts had been delayed by increasing disarray in her cabinet over the issue.
On Friday, Transport Minister Jo Johnson became the latest government figure to quit his post over Brexit, arguing that UK was "on the brink of the greatest crisis" since World War Two.On Friday, Transport Minister Jo Johnson became the latest government figure to quit his post over Brexit, arguing that UK was "on the brink of the greatest crisis" since World War Two.
Simon Derrick, head of currency research at Bank of New York Mellon, said the pound's drop was "obviously related to the uncertainty over the weekend", but noted that sterling had largely "held its own" against the euro. Simon Derrick, head of currency research at Bank of New York Mellon, told the BBC that the pound's weakness against the dollar was "obviously related to the uncertainty over the weekend", but added: "At least half of it is actually about dollar strength and the expectation that the Federal Reserve will hike interest rates in December."
He told the BBC: "At least half of it is actually about dollar strength and the expectation that the Federal Reserve will hike interest rates in December." The resurgent dollar also hit the euro, down 0.6% against the greenback on Monday to $1.1265, having earlier touched a 17-month low.
Connor Campbell, financial analyst at Spreadex, said: "Sterling's early November rebound continued to unravel on Monday, the currency coming down with a nasty case of the Brexit blues.
"With her most ardent anti-EU MPs opposed to her customs arrangement plans, and a potential Remain rebellion brewing following the resignation of Jo Johnson, Theresa May appears to have been forced to abandon the emergency cabinet meeting that was pencilled in, after a supposed breakthrough last week."
The resurgent dollar also hit the euro, down 0.73% against the greenback on Monday to a 17-month low of $1.1253.
Monex Europe analyst Bart Hordijk blamed the euro's weakness on "the four apocalyptic horsemen" of "Brexit, Italy, slower growth and a cautious European Central Bank".Monex Europe analyst Bart Hordijk blamed the euro's weakness on "the four apocalyptic horsemen" of "Brexit, Italy, slower growth and a cautious European Central Bank".
He forecast that the euro could fall further against the dollar.He forecast that the euro could fall further against the dollar.
"Signs are certainly dire for the euro and a drastic change of monetary policy signalling, the Italian budget stance, macroeconomic prospects, or Brexit is what the currency needs now to turn this momentum around," he said."Signs are certainly dire for the euro and a drastic change of monetary policy signalling, the Italian budget stance, macroeconomic prospects, or Brexit is what the currency needs now to turn this momentum around," he said.