Investing.com - The pound briefly rose above the 1.30 level against the dollar on Monday, boosted by prospects that Theresa May will become the next U.K. prime minster much earlier than had been anticipated.
GBP/USD touched highs of 1.3018 before pulling back to trade at 1.2959, holding above the post-Brexit 31-year trough of 1.2794 set last Wednesday.
Sterling found some support after Andrea Leadsom, one of the two candidates from Britain’s ruling Conservative Party to succeed Prime Minister David Cameron pulled out of the race, leaving her rival Theresa May as the only candidate.
A new British prime minister had not been expected until a Conservative Party ballot due to take place on September 9, but the abrupt withdrawal of Leadsom cleared the way for May to take over much sooner.
The decision removed some of the political uncertainty that has hit the pound since David Cameron announced his decision to step down in the wake of the shock June 23 vote to exit the European Union.
But sterling remained under pressure amid mounting expectations for a rate cut from the Bank of England at the conclusion of its policy meeting on Thursday.
The BoE could potentially cut interest rates to fresh record lows and step up quantitative easing measures to cushion the U.K. economy from the fallout from Brexit.
The BoE has said it expects the economy to suffer a material slowdown because of the uncertainty caused by the vote to leave the EU.
U.K. Chancellor George Osborne travelled to New York on Monday to urge international investors not to give up on Britain, as the impact of the Brexit vote continued to hit the global economy.
Three reports released earlier Monday showed that British consumer spending fell last month, the business outlook deteriorated and economic activity in London slowed sharply.
The reports came after market research company Gfk said Friday that its survey of British consumer morale showed the largest decline in more than twenty years.
The prospect of more easing boosted shares in London, with the FTSE 100 up 0.98%.
Shares across Europe were also higher, following on from strong gains in Asia as Friday’s robust U.S. jobs report and hopes for additional economic stimulus in Japan bolstered risk appetite.
Japan’s Nikkei ended up 3.98% after Prime Minister Shinzo Abe’s ruling coalition increased its majority in the upper house in parliamentary elections on Sunday.
The win for Abe’s coalition fed hopes for a fresh package of stimulus measures to spur economic growth.
Risk appetite had already been boosted after data on Friday showing that the U.S. economy added 287,000 jobs in June, well above the 175,000 jobs forecast by economists.
The stronger than expected jobs report indicated that the economic recovery is back on track.
But the data did little to alter the view that the Federal Reserve will stick to cautious plans for hiking interest rates after May’s payrolls figure was revised down to 11,000, the smallest monthly increase since 2010.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.33% at 96.63.