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Pound Weakens as October Blues Provoke Memories of Flash Crash

Bloomberg logoBloomberg 06/10/2017 Charlotte Ryan
© Getty

October blues are starting to weigh on the pound -- again.

Sterling is headed for its worst week in a year as questions about whether Prime Minister Theresa May will stay or go haunt traders. A year ago this Saturday, days after the Conservative party’s annual conference, the pound slumped more than 6 percent in less than a minute during thin trading as the markets opened in Asia. A year later, the same factors are still punishing the currency, with doubts on May’s leadership following a mishap-filled Tory-party conference speech earlier this week sending the pound lower and Brexit looking no clearer.

Pound's Warning Flash © Provided by Bloomberg LP Pound's Warning Flash

“The double whammy of negative economics and politics continues to weigh on the pound,” said Neil Jones, London-based head of FX sales at Mizuho Bank Ltd. “Domestic disarray and uncertainty are at the helm, and with or without May the pound is destined for lower still.”

Related: Political uncertainty is hitting the pound hard

The pound fell 0.4 percent as of 7:42 a.m. to $1.3070, taking its weekly decline to 2.5 percent. It weakened 0.2 percent to 89.46 pence per euro. The yield on 10-year U.K. government bonds was little changed at 1.39 percent.

Ex-Tory chairman Grant Shapps confirmed on Friday that up to 30 MPs are backing a leadership election and said they are “perfectly within their rights” to urge May to quit. The fact that the alternative “is a hardline Brexit contender” like Foreign Secretary Boris Johnson is key for the lower pound, said Jones.

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