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Pound Falls On May's Leadership Concerns

The pound declined against its major counterparts in the European session on Thursday amid continued political uncertainty, as U.K. Prime Minister Theresa May is expected to ask to set a departure date during her meeting with the 1922 Committee today. 

May is meeting with members of the executive of the 1922 Committee of backbench Conservative MPs amid growing pressure to set a date for her departure from office or else face another confidence vote next month. The withdrawal agreement is expected to put to vote in Parliament for the fourth time in June, although the possibility of passing it seemed low. 

Markets are pricing the failure of Brexit deal again, triggering the removal of May from office. Caution prevailed after the United States hit Huawei with severe sanctions, adding to prevailing uncertainty over trade. The currency held steady against its major rivals in the Asian session, excepting the yen. The pound weakened to 0.8746 against the euro, its lowest since February 19. The currency is poised to target support around the 0.89 mark. 

Data from Eurostate showed that the euro area trade surplus declined in March on higher imports. The trade surplus fell to a seasonally adjusted EUR 17.9 billion from EUR 20.6 billion in February. The surplus was also below the forecast of EUR 19.4 billion. The pound slipped to a new 3-month low of 1.2810 against the greenback from Wednesday's closing value of 1.2840. 

The pound is likely to test support around the 1.27 region. The U.K. currency that closed Wednesday's trading at 1.2954 against the Swiss franc fell to near a 2-month low of 1.2918. Next key support for the pound is seen around the 1.27 level. Although the pound declined to a 4-month low of 140.20 against the yen early in the session, it recouped some of its losses in a short while. 

The pair was valued at 140.74 when it ended deals on Wednesday. Looking ahead, U.S. weekly jobless claims for the week ended May 11, housing starts and building permits for April are due in the New York session.

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