Wednesday 18 July 2018

Tory coup sends sterling lower as ECB frets at strength of euro

Up to 30 MPs could rebel against Theresa May following her disastrous party conference speech
Up to 30 MPs could rebel against Theresa May following her disastrous party conference speech
Donal O'Donovan

Donal O'Donovan

Sterling fell to its weakest level in nearly a month on speculation that a heave against UK Prime Minister Theresa May is under way following a disastrous speech on Wednesday.

It comes amid volatility in European markets on the back of the fast-moving constitutional crisis in Catalonia.

The pound fell 0.9pc to $1.3134 in late afternoon in London.

"Sterling has fallen in value against the euro in six of the past seven sessions and there is growing concern that the cross can move back towards the 93p highs that we witnessed in August," said Bank of Ireland's John Moclair.

Policy announcements at Theresa May's Conservative Party's annual conference were overshadowed by reaction to mishaps including a fit of coughing and letters falling off signage that damaged her already shaky leadership.

The Conservative-leaning 'Daily Telegraph' has reported that up to 30 Tory MPs are prepared to sign a letter calling for the Prime Minister's resignation as the party struggles to manage Brexit.

In bad news for Irish exporters, sterling was lower against the euro even though the single currency was generally weaker against its other peers.

"If sterling really has been sold today for fears of a rebellion, that may be short-lived," said Nomura International strategist Jordan Rochester.

"Tory rebels will likely remember the long game, which is to place all the blame from Brexit negotiation woes on Theresa and move on when 2019 presents itself."

In Spain stocks rebounded yesterday from heavy losses in the previous session driven by escalating tensions over Catalonia, but the markets remain volatile.

Spain's main IBEX share index ended the session up 2.5pc, led by its banking stocks, as worries over Catalonia eased.

Shares in Banco Sabadell rose 6.2pc on news the bank's board would meet to discuss moving their headquarters out of Catalonia's capital city, Barcelona.

Banks can secure future access to European Central Bank (ECB) supports regardless of the Catalan situation, by registering their headquarters at addresses elsewhere in Spain.

Meanwhile, minutes from last week's ECB policy meeting show discussion inside the central bank is under way on how to adjust monetary stimulus next year amid concerns about the economic effects of the rapid appreciation of the euro in recent months.

ECB policy makers discussed "general trade-offs" that will occur in any tapering of the massive €60bn a month bond-purchase programme the central bank has used to prop up the euro-area economy, an account of the September 6 and 7 policy meeting published by the ECB showed yesterday.

In views that point to an extended winding-down period, the minutes of the meeting noted "broad agreement" that substantial support was still needed to ensure inflation's return to target.

But officials expressed concern about the strength of the currency and they agreed that the euro required monitoring. (Additional reporting agencies)

Irish Independent

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