Sterling plunged with the resignation of Brexit Minister Raab
The pound against the US dollar plunged more than 1.5% on Thursday morning after the Brexit Secretary of State Dominique Raab resigned, bringing more pressure to British Prime Minister Theresa May.
In a letter to the British leader, Raab said that after the ruling Conservative Party made a commitment to the country in the election declaration last year, he could not coordinate with the terms of the Brexit agreement she proposed.
“I regret to say that after the cabinet meeting on the Brexit agreement yesterday, I have to resign. I understand why you chose to reach an agreement with the EU under the proposed terms. I respect different opinions. All of our colleagues,” Raab said in a letter to May.
“As far as I am concerned, I can’t support this deal for two reasons,” Raab said. “First, I think the regulatory regime proposed for Northern Ireland poses a very real threat to the integrity of the UK.”
“Secondly,” he added, “I cannot support unrestricted support arrangements, that is, the EU has a veto over our ability to withdraw.”
These concerns are reflected in the foreign exchange derivatives market, where the three-month and six-month UK currency expected volatility indicators remain firm, while the extreme short-term volatility indicators are slightly lower.
This uncertainty is also reflected in the money market, except for investors raising interest rates next year.
Bond yields fell across the board, with UK government bond yields falling by 9 basis points to 0.7% in the benchmark biennium.
This week’s big move has driven the volatility of the British currency, and the price volatility achieved this week has grown at an average annual rate of 12%, twice the end of October.