Pound Declines as U.K.'s May Suffers Another Political Setback

(Bloomberg) -- The pound fell from a two-week high as three members of the U.K.’s ruling Conservative party resigned to join a new independent group in Parliament.

Sterling snapped three days of gains as the news confirmed speculation in the market that Prime Minister Theresa May’s party would also suffer resignations after several Labour lawmakers quit the party earlier in the week.

The impact of the resignations wasn’t immediately clear as the new group doesn’t have a party, leader or policy platform. While the departures reduce May’s majority, they also make a no-confidence motion against her less likely as the number of Labour members who have quit reduces the numbers the opposition could count on to back a challenge.

“It’s not a big surprise the three resigned from the party so there’s no big market reaction,” said Mikael Olai Milhoj, an analyst at Danske Bank A/S. “But it does make life harder for Theresa May, giving her an even smaller majority.”

The pound had earlier touched the highest since Feb. 4 on optimism that a meeting between May and European Commission President Jean-Claude Juncker in Brussels this evening may yield progress on the impasse in the Brexit talks.

Sterling fell 0.3 percent to $1.3022 as of 11:20 a.m. London time after earlier rising as high as $1.3076. The currency also weakened 0.3 percent to 87.05 pence per euro after gaining 0.8 percent Tuesday.

May is scheduled to meet Juncker at 5:30 p.m. U.K. time.

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