Pound SINKS against Euro amid fears Theresa May to be REPLACED by Boris Johnson
THE pound has plunged to its lowest level in more than three weeks against the euro, amid fears Theresa May is to be replaced as Prime Minister by Boris Johnson- at a crucial juncture in Brexit talks.
Sterling tumbled to 1.1134 against the euro and down to 1.306 against the US dollar amid calls for Theresa May to be forced out as party leader and Prime Minister.
The pound had been boosted in recent weeks by solid economy data and expectations the Bank of England will soon raise interest rates.
But Brexit negotiations and the potential for a change in leadership are now sending fears through markets.
Earlier this week, the Prime Minister gave a keynote speech at the Conservative Party Conference, but it was overshadowed by her coughing and a prankster crashing the stage.
The appearance prompted Nigel Farage among other to dub Mrs May and the speech a "disaster".
It comes after Mr Johnson publicly laid out a Brexit blueprint, which appeared to show the foreign secretary's ambition to take greater control of the UK's exit from the European Union (EU).
The political turmoil from a change in leadership would likely deal the pound a heavy blow.
Kathleen Brooks, research director at City Index, said: "The market seems to be ignoring some fairly solid economic data, progress, albeit slow, in the Brexit talks, and a weaker dollar and euro in favour of politics.
"After Theresa May’s speech at the Tory party conference on Wednesday, there are rumours that she will be asked, forced, to step down by her own party.
"The prospect of a leaderless UK in the middle of the Brexit process, or even worse, a Prime Minister Boris, are right to unnerve sterling traders."
In recent weeks, EU chief negotiator Michel Barnier and Brussels chief Jean-Claude Juncker have said Brexit talks have been progressing too slowly.
And a new leader could further hold up a deal.
Bank of England deputy governor Sam Woods this week warned a transition deal with the EU needs to be in place before Christmas to prevent an exodus of City jobs.
David Madden, market analyst at CMC Markets UK, said: "GBP/USD is lower on the session as traders were questioning how long Theresa May will be in the top job.
"Downing Street declared that resignation is not an issue for Mrs May.
"The fact the government had to make that statement says a lot."