The pound drifted lower against its major counterparts in European deals on Monday, amid concerns over rift in the U.K. ruling Conservative Party, after Work and Pensions Secretary Duncan Smith resigned last Friday over Budget benefit cuts.
Duncan Smith, a campaigner for Brexit, announced that he could no longer support the U.K. budget cuts to disability benefits when taxes for higher earners and companies are being slashed.
Differences about economic policy comes as the Conservative party struggles with deep divisions over the country’s membership in the EU.
While speaking in London, Bank of England policymaker Kristin Forbes said that any analysis of vulnerabilities related to current account deficits should no longer just treat the current account deficit as a trade deficit.
“Heightened risk and uncertainty can not only lead to challenges financing a current account deficit, but also affect the exchange rate, the relative returns that foreign and domestic investors earn, and the valuation of any international borrowing and investments,” she told.
In other economic news, survey results from the Confederation of British Industry showed that UK manufacturing output declined the most in six-and-a-half years, but producers expect volume growth next month.
The balance of manufacturing volume of the CBI’s monthly Industrial Trends Survey declined to -15 in the three months to March. The score was the lowest level since September 2009, when it was -19.
The currency has been declining in Asian trading.
The pound depreciated to 1.4375 against the greenback, its lowest since March 17. This is lower by 0.68 percent from Friday’s closing value of 1.4473. If the pound-greenback pair extends slide, 1.42 is likely seen as its next support level.
The pound weakened to 160.14 against the yen, a 4-day low, and held steady thereafter. On the downside, the pound may find support around the 156.00 region.
The pound declined to 4-day lows of 1.3930 against the franc and 0.7838 against the euro, from its early highs of 1.4033 and 0.7785, respectively. The next possible support levels for the pound are seen around 1.38 against the franc and 0.795 against the euro.
Looking ahead, U.S. existing home sales data for February is slated for release in the New York session.
At 12:40 pm ET, Federal Reserve Bank of Atlanta President Dennis Lockhart is expected to speak on the economic outlook and monetary policy before the Rotary Club of Savannah.
Published: 2016-03-21 13:18:00 UTC+00
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