LONDON (Reuters) – Britain’s pound fell to four-weeks lows on Friday, amid growing uncertainty over Prime Minister Theresa May’s control of the leadership and strong U.S labour market data that boosted the dollar.
Sterling was on track for its worst week in a year against the dollar and on a trade-weighted basis, after a more than 2 percent fall.
Prime Minister May said on Friday she would stay on as leader to provide stability after a former chairman of her Conservative Party said he had the support of 30 lawmakers who wanted her to quit.
May’s assurances gave sterling a brief lift – it briefly topped $1.31 after her statement – but they were not enough to assuage worries over divisions in the Conservative government.
“What’s weighing on sterling is primarily political developments. The market is pricing in a growing risk of an early election or a leadership change and the possibility of a leader with a hard Brexit agenda,” said Adam Cole, chief currency strategist at RBC.
Data last week showed speculators had turned positive on sterling for the first time in almost two years in the week up to last Tuesday. The gains were driven by expectations the Bank of England would raise interest rates and optimism around Brexit negotiations. [IMM/FX]
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