Prime Minister Theresa May clung to power on Thursday after her final Brexit gambit backfired, overshadowing a European election that has shown a United Kingdom still riven over its divorce from the EU.
May’s departure will deepen the Brexit crisis as a new leader is likely to want a more decisive split, raising the chances of a confrontation with the European Union and an election that could usher in a socialist government.
In such a fluid situation, Britain faces an array of options including an orderly exit with a deal, a no-deal exit, an election or a second referendum that could ultimately reverse the 2016 decision to leave the EU. Her last gambit, offering a possible second referendum and closer trading arrangements with the EU, triggered a revolt by some Brexit-supporting ministers and triggered the resignation of her parliamentary business manager.
On Thursday, with Britons voting in a European election in which pre-poll surveys suggested May’s Conservatives would be thrashed by Nigel Farage’s Brexit Party, May was digging in.
The dollar hit its highest level in two years and the yen rose half a per cent on Thursday, as economic and political uncertainties swept through Europe and Asia.
While the United States is not without its own worries - namely trade conflict with China - investors see the greenback as a relatively safe haven because of its preeminence in the global economy and the extra cushion of having some of the highest interest rates in the developed world.
Activity in Germany’s services and manufacturing sectors fell in May, a survey showed on Thursday, reflecting the toll that unresolved trade disputes are having on Europe’s largest economy.
Compounding these worries, European parliamentary elections began on Thursday with eurosceptic parties expected to do well, raising concerns about the single currency’s stability.
09.30 – GBP: Retail Sales MoM; Forecast at -0.3% against previous of 1.1%
13.30 – USD: Core Durable Goods Orders MoM; Forecast at 0.1% against previous of 0.3%