Pound under pressure from political worries and bomb blast

Sterling traded lower on political worries and the Manchester bomb blast that left 22 people dead.

Prime Minister Theresa May was accused of dishonesty in the wake of her U-turn on “dementia tax” in a blow to the Conservative party´s election campaign. Meanwhile, the insistence from Brexit Secretary David Davis that the UK could walk out of talks with EU negotiators over demands to pay a €100bn divorce bill were an additional source of pound weakness.

The suicide bomb attack in Manchester on Monday night which left 22 people dead and 59 injured also weighed.

May U-turn

Theresa May was forced to change tack after just four days as Conservative campaigners complained that her policy on funding care for the elderly was deeply unpopular. On Monday, May pledged to put in place a limit on what people must pay for social care. It marked a U-turn on the Tory policy published last week that would have scrapped the cap of £72,000 on what the elderly must pay for social care. The cap is due to come into force in 2020 after having been supported by the former Prime Minister David Cameron.

Brexit row

Sterling is also being pressured by worries over a hard Brexit, with the UK and EU appearing to be as far apart as ever on Brexit negotiations. David Davis told the Sunday Times that the UK would walk away from negotiations unless the EU drops its demands on the divorce bill.

The estimate of what the EU wants the UK to pay to leave the EU rose to €100bn from €60bn in recent weeks after EU offiicals factored in farming subsidies and administration fees.

Sterling weakness

Sterling weakened on Monday as the political furore surrounding social care saw the Conservative party´s lead narrow to nine points versus the 20-point lead held early in the campaign. Sterling also lost ground in the aftermath of the suicide bomb blast in Manchester. The pound was trading at around two-month lows on Tuesday morning, down by 0.24% on the session against the euro and 0.13% versus the dollar.