The British pound sank Monday on uncertainty surrounding Prime Minister Theresa May’s political future, dealers said.

British Prime Minister Theresa May

The pressure on sterling came after reports that dozens of MPs in the ruling Conservative Party were backing a move to oust May, whose leadership has been battered by scandals and crises.

“The potential of a Tory vote of no confidence in Theresa May has pushed the pound lower,” said IG analyst Joshua Mahony.

The currency fell as far as $1.3062 in the European morning — dangerously close to the $1.3050 level that pessimists believe would trigger a sustained sell-off. But the pound managed to claw back some of its losses by the end of the day.

London’s benchmark FTSE 100 index of blue-chip firms got an early boost from the weaker pound, seen to be positive for multinationals, but eventually joined its European peers’ downward drift — although it still did slightly better than continental European bourses.

Two British cabinet ministers have been forced to resign in recent weeks — one over sexual harassment allegations and the other for a series of unauthorised meetings with Israeli officials — weakening May’s leadership.

– Clarifying minds –
Questions over May’s future come as a secret letter emerged from two cabinet ministers instructing her how to run Brexit.

The leaked memo from Foreign Secretary Boris Johnson and Environment Secretary Michael Gove, two top Brexit advocates, told May to ensure other ministers back the process by “clarifying their minds”.

The government is under pressure to meet a two-week deadline set Friday by the EU’s chief Brexit negotiator Michel Barnier for a deal on exit terms ahead of a December EU summit.

“Clearly the Brexit negotiations are at a crucial juncture,” noted Rabobank analyst Jane Foley.

“However, without a majority May’s leadership has been weakened and she appears unable to rally her cabinet behind her.”

– Tax reform doubts –
In recent weeks, many major world markets have surged — with Wall Street hitting several records and Tokyo touching 26-year highs — on optimism about the global economy and a series of strong corporate earnings.

But investors have started to cash in as worries begin to emerge about high share valuations, while there are also fears about Donald Trump’s much-vaunted tax cuts as US lawmakers struggle to agree a deal.

Doubts about the tax deal had Wall Street treading water Monday.

New York investors also took a dim view of industrial giant General Electric slashing its dividend as it announced thousands of job cuts as part of a plan to shrink its business to focus on aviation, healthcare and energy.

GE’s stock was down by around five percent approaching midday in New York.

– Key figures around 1640 GMT –
Pound/dollar: DOWN at $1.3108 from $1.3193 at 2200 GMT Friday

Pound/euro: DOWN at 1.1245 euros from 1.1308

Euro/dollar: DOWN at $1.1656 from $1.1665

Dollar/yen: DOWN at 113.56 yen from 113.50 yen

London – FTSE 100: DOWN 0.2 percent at 7,415.18 points (close)

Frankfurt – DAX 30: DOWN 0.4 percent at 13,074.42 (close)

Paris – CAC 40: DOWN 0.7 percent at 5,341.63 (close)

EURO STOXX 50: DOWN 0.5 percent at 3,574.52

New York – DOW: FLAT at 23,432.13

Tokyo – Nikkei 225: DOWN 1.3 percent at 22,380.99 (close)

Hong Kong – Hang Seng: UP 0.2 percent at 29,182.18 (close)

Shanghai – Composite: UP 0.4 percent at 3,447.84 (close)

Oil – Brent North Sea: DOWN 74 cents at $62.78 per barrel

Oil – West Texas Intermediate: UP six cents at $56.80

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