Pound Falls to Four-Week Low as May Speech Fuels Tory Rebels

(Bloomberg) -- The pound fell to the lowest in nearly a month as newspaper reports speculated that U.K. Prime Minister Theresa May could face a leadership rebellion from within her own party following a disastrous speech Wednesday.

Sterling declined versus all of its Group-of-10 peers and demand for dollar longs intensified as U.S. trading got underway, adding to selling by leveraged accounts, traders in London said. The prime minister's policy announcements at her Conservative party's annual conference were overshadowed by mishaps including coughing fits, and up to 30 Tory lawmakers are prepared to sign a letter calling for her resignation, according to the Telegraph.

“If sterling really has been sold today for fears of a rebellion, that may be short-lived,” said Nomura International strategist Jordan Rochester. “Tory rebels will likely remember the long game, which is to place all the blame from Brexit negotiation woes on Theresa and move on when 2019 presents itself.”

The pound fell 0.9 percent to $1.3134 as of 2:22 p.m. in London, nearing a test of support at its 55-day moving average. It weakened 0.5 percent to 89.24 pence per euro. The yield on 10-year U.K. government bonds dropped two basis points to 1.36 percent.

Leveraged accounts went bullish on the pound for the first time since May 2016 last week, according to Commodity Futures Trading Commission data. With the market now net long on the currency, it is “likely stops rather than fresh positions” triggering the move lower, Rochester said.

--With assistance from Vassilis Karamanis

To contact the reporter on this story: Charlotte Ryan in London at cryan147@bloomberg.net.

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Neil Chatterjee, Scott Hamilton