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Pound plunges as MPs rebel against Theresa May's Brexit plan

Alanna Petroff
Senior Economics Correspondent at Yahoo Finance UK
Pro-Brexit Conservative MP Jacob Rees-Mogg called for a vote of no-confidence in the British Prime Minister Theresa May. Photo: ADRIAN DENNIS/AFP/Getty Images

The UK pound dropped sharply on Thursday as members of Prime Minister Theresa May’s own party threatened to oust her over her draft Brexit deal.

Multiple ministers, including Brexit minister, Dominic Raab, resigned on Thursday in protest over May’s draft agreement with the European Union. Hardline Brexiteer Tory MP Jacob Rees-Mogg submitted a letter of no confidence in the Prime Minister later in the day, raising the prospect of a leadership challenge.

Sterling (GBPUSD=X) was down by roughly 2% against the US dollar to around $1.27 and down 2% against the euro to €1.13 (GBPEUR=X) in the late afternoon.

“The pound has been under intense selling pressure today, as resignation after resignation from the government ranks ramped up fears of a no-deal Brexit in March, said Joshua Mahony, market analyst at IG. “The biggest resignation so far has been that of Brexit Secretary Dominic Raab, who decided he couldn’t back the deal he helped negotiate.”

Shares in the Royal Bank of Scotland (RBS.L) plunged by roughly 10%, making it the biggest loser on the benchmark FTSE 100 index.

“Lower interest rate hike expectations, coupled with the fear that a no-deal Brexit could bring chaos to trade, are raising worries over the performance of UK banks going forward,” said Mahony.

Shortly after Raab resigned, Esther McVey, the secretary of state for work and pensions, also quit.

Earlier in the morning Shailesh Vara, the member of parliament for North West Cambridgeshire, also submitted his resignation.

Multiple minister resignations had been expected as prime minister Theresa May calls on them to back her unloved draft Brexit deal. Raab, who was in charge of Brexit negotiations, is the second Brexit minister to quit, following the resignation of David Davis in July.

There are strong doubts over May’s ability to stay in power and convince the majority of MPs to support her divorce deal, which would maintain close ties between the UK and European UnionMinisters on all sides are upset with her agreement, including hard-core Brexiteers and those who hoped to remain in the EU.

May had scored a victory on Wednesday night by announcing that her cabinet, the most senior ministers in her party, supported her plan. This pushed the pound higher, though the move was rather modest.

May said on Wednesday evening the nation must choose between her deal, no deal or no Brexit at all. She said she had secured the best deal possible, encompassing issues related to UK citizens’ rights in the EU, border controls, energy issues, data protections and the divorce payment that the UK will pay to the EU.

Brexit is slated to occur at the end of March 2019.

Related: What is a no-deal Brexit?

— Oscar Williams-Grut and Lianna Brinded contributed reporting.