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Leadership Challenge?

The British pound recovered from 2-1/2-week lows but gains were limited because of continuing uncertainty about whether Prime Minister Theresa May can see off her opponents and secure Britain an exit deal from the European Union.

May told parliament on Monday that the Brexit deal with Brussels was 95 percent complete, and she urged restive lawmakers to back her in the final stages of Britain’s exit from the EU, saying talks were in their most difficult phase.

But opponents both within her own party and in the opposition have stepped up criticism of the deal she is trying to get, even if an imminent leadership challenge appears less likely.

Analysts said it would remain difficult to find a compromise between May, her allies and those in her party that wanted a sharper break from the EU.

While a leadership challenge may no longer be imminent, it remains at an elevated risk, which is placing the pound under downward pressure in the near-term. The Brexit mood remains negative for the pound, which could fall more sharply if a leadership challenge materialises in the coming months.

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