Pound nosedives after Dominic Raab quits as Brexit Secretary
- Pound had steadied after Brexit deal was agreed by Cabinet yesterday
- But Brexit Secretary’s bombshell departure sent Sterling tumbling today
- Experts say markets are responding to fears of no-confidence vote in PM
The pound tumbled today after Brexit Secretary Dominic Raab’s resignation sparked fears the UK could leave the EU without a deal.
Sterling tumbled 1.8% to 1.27 US dollars and dropped 1.6% to 1.13 euros.
Mr Raab sensationally quit the cabinet this morning, saying he cannot support Theresa May’s plan for Brexit.
His resignation was followed by that of Work and Pensions Secretary Esther McVey, who said Mrs May’s Brexit deal ‘does not honour the result of the referendum’.
The pound fell sharply against the US dollar this morning after Dominic Raab’s resignation
Experts said it will be a pivotal day for the Prime Minister and sterling, whose fortunes now appear linked to her ability to remain in post.
James Hughes, chief market analyst at Axi Trader, said: ‘Sterling previously moved on clarity rather than positive and negative headlines.
‘This has now changed and it seems sterling is now a barometer of the PM’s ability to hold onto her job.’
He added: ‘If the discontent and resignations continue then the pound will remain under pressure.’
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David Cheetham, chief market analyst at online trading group XTB, said the currency reaction was ‘reminiscent of the Chequers deal in the summer where initial support from the Cabinet has proved short-lived for Theresa May’.
Nomura analyst Jordan Rochester said: ‘Raab resigning just now changes the ballgame. [It’s] hard to be optimistic on the pound in the short term.
‘But equally Theresa May has survived much worse. It’s whether we get a flood of (ministerial) resignations to follow.’
The currency nosedived after Dominic Raab quit as Brexit Secretary. His resignation was followed by that of Work and Pensions Secretary Esther McVey (right)
Housebuilders, retailers, and domestic banks all sank and the FTSE 250 tumbled one per cent in early deals, while a slump in Sterling helped keep the exporter-heavy FTSE 100 afloat, up 0.3 percent shortly before 10am.
Housebuilders Barratt Development, Persimmon , Taylor Wimpey, Berkely Group all fell 4.9 to 6.7 percent, among the worst FTSE 100 fallers.
Bovis Homes, Redrow, Bellway and Crest Nicholson fell 4.2 to 6.4 percent on the mid-cap index.
Barclays shares fell 6.6 percent and RBS shares fell 6.2 per cent, with Lloyds down 4.4 per cent as domestic banks were hit by the resignation, which heightened political uncertainty.
Hours before Mr Raab’s and Ms McVey’s resignations, Shailesh Vara had quit as minister of state for Northern Ireland, saying Mrs May’s agreement ‘leaves the UK in a halfway house’.
The departures leave it even less likely that Mrs May will be able to get her agreement with the EU through Parliament and could see her party move to oust her as leader.
The pound had ended higher on Wednesday after the Prime Minister said she had won over her divided cabinet following a five-hour meeting.
But this morning’s resignation sent jitters through money markets.
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