Last week saw some tumultuous UK politics, as two key members of Prime Minister, Theresa May's cabinet resigned over the government's intended Brexit strategy, hammered out at Chequers on Friday.
First to go was Brexit Secretary, David Davis who’s exit was announced on Sunday night. Davis’ letter of resignation highlighted that “the general direction of policy will leave us in at best a weak negotiating position, and possibly an inescapable one.” Replacing Davis will be Dominic Raab who has been promoted from housing minister. Next to go and the one that really rattled the pound was the departure of Foreign Secretary, Boris Johnson. Rumours started to circulate at lunchtime that he may be leaving and around 3pm it was confirmed he had quit.
Following the news, the GBP/USD pair had lost 150 pips, bottoming out at 1.32 as markets weighed up the chances he would make a bid for power throwing the Tory party into turmoil. Johnsons resignation letter, stated that the “Brexit dream is dying, suffocated by needless self-doubt.” In a barbed response by May of Johnsons resignation, she said, “I am sorry - and a little surprised - to receive it after the productive discussions we had at Chequers on Friday.” Health Secretary, Jeremy Hunt has been drafted in as replacement for Johnson as Foreign Secretary.
The GBP/USD cross closed the week under the 1.32 mark as Donald Trump weighed into the Brexit debate adding downward pressure to an already fragile pound.
In an interview with The Sun newspaper, Donald Trump undermined UK Prime Minister, Theresa May's Brexit plan by saying “If they do a deal like that, we would be dealing with the European Union instead of dealing with the U.K., so it will probably kill the deal.” He also commented that ex-Foreign Secretary, Boris Johnson, who resigned over the proposed plan would make a “great prime minister.”
The comments from the leader of a country many consider to be our closest ally will add to the argument of those who consider Theresa May a lame-duck PM with change at the top needed.