Pound falls sharply as May faces mounting pressure over Brexit plan - as it happened

Pound suffers heavy sell-off after Dominic Raab and Esther McVey resign from the cabinet over Theresa May's Brexit plan

• Pound falls 1.9% against the euro and the dollar
• Sterling in biggest one-day drop against euro since June 2016
• Esther McVey follows Raab in resigning from cabinet - politics live
• Billions wiped off value of UK-focused firms
• Surprise fall in UK retail sales in October

5.09pm GMT

The pound has had a shocker of a day, thanks to the resignation of two cabinet ministers and countless rumours over the future of Brexit, Theresa May and the economy.

Sterling is down 2% against the euro, on the biggest one-day fall since 27 June 2016 - four days after the Brexit vote. It is trading at a1.1256.

4.23pm GMT

S&P says Britain's agreement in principle on the draft withdrawal treaty does not immediately affect its UK rating (AA/A-1+ with a negative outlook).

However, it could lower the rating if a "disorderly" Brexit becomes a reality:

We could lower the ratings under a scenario in which the likelihood of a "disorderly" Brexit appears more apparent.

We define a "disorderly" Brexit as one which would either significantly limit UK manufacturing and services access to key European markets, or subject them to tariffs and non-tariff barriers high enough to reduce their ability to compete.

4.11pm GMT

Capital Economics has published a note titled: Trying to make sense of another day of Brexit chaos.

Oliver Jones at the consultancy says the market reaction to events today gives a good indication of what might happen in the event of a no deal scenario:

Sterling has once again been the biggest casualty. And Gilt yields have fallen - investors are clearly not paying any heed to Mark Carney's suggestion that the Bank of England might have to raise rates in the event of "no deal". Most interestingly, the FTSE 100 has not fared that badly in local currency terms. But this reflects the fact that it is packed full of multinationals who benefit from a weaker currency. Indeed, in another re-run of 2016, the more domestically focused mid-cap FTSE 250 has performed a lot worse.

Second, Prime Minister May's apparent failure to garner support for her deal has arguably also increased the likelihood of the opposite "extreme" Brexit outcome, a second referendum with an eventual vote to remain in the EU. Clearly, investors have focused more on the possibility of "no deal", given the fall in sterling. And there are significant political and procedural hurdles standing in the way of another referendum. That said, there is still a sense that all bets could be off if today's Cabinet resignations and rumours of a challenge to May's leadership spell the end of her deal (and her time in Number 10). Demand for options protecting against moves in sterling in either direction has jumped to its highest in more than a year and a half.

3.59pm GMT

Time for a market recap, in what has been a volatile day so far for the pound and UK shares as traders fear what lies ahead for Brexit, Theresa May and the wider economy.

3.22pm GMT

The City watchdog says it is staying in touch with firms during this period of market volatility.

A spokesperson for the Financial Conduct Authority:

As you would expect in this type of situation we have regular contact with firms and will continue to engage with them.

2.33pm GMT

US markets are down after the opening bell:

2.14pm GMT

Back in Europe, all major indices are in the red:

2.14pm GMT

Michael Pearce, senior US economist at Capital Economics, says that despite the 0.8% rise in US retail sales in October, spending growth has started to slow:

Looking beyond the 0.8% surge in headline retail sales, which was boosted by a price-related surge in gasoline prices, there are signs that underlying spending growth has begun to slow.

Even accounting for the boost to real incomes from the more recent drop in oil and gasoline prices, we expect consumption growth to slow further in 2019.

2.06pm GMT

Sticking with the US, the number of Americans filing new jobless claims rose unexpectedly last week according to the Labour Department.

Initial claims were 216,000 for the week ended 10 November, up from 214,000 a week earlier. Economists polled by Reuters had forecast 212,000.

US Opening Calls:#DOW 25073 -0.04%#SPX 2701 -0.08%#NASDAQ 6784 +0.19%#IGOpeningCall

1.41pm GMT

Over in the US, data just out showed US retail sales rose 0.8% in October.

It was stronger than the 0.5% increased forecast by economists, and a big improvement on September when sales dipped 0.1%.

1.29pm GMT

It is not just the pound that is being hammered. Britain's biggest housebuilders are on course for their biggest one-day fall since the UK voted to leave the EU.

The market has taken a big red pen to stocks which are heavily exposed to the UK economy like the banks, retailers and housebuilders.

These sectors were already under pressure, but the potential for an orderly Brexit to unravel in the next few days is causing further distress to be manifested in share prices.

1.15pm GMT

Jacob Rees-Mogg has dealt a fresh blow to the pound, as he prepares to submit a letter of no confidence in the prime minister.

The pound has suffered a fresh blow after a spokesman confirmed the planned move by the Conservative MP.

12.53pm GMT

Related: Pound falls steeply as Brexit resignations rock UK government

12.51pm GMT

In other news, the UK's key scheme for ensuring the lights stay on during the winter months has been suspended after a the European court of justice ruled that it constitutes illegal state aid.

So the UK capacity market, the scheme for ensuring backup electricity supplies from gas, coal and other power stations, has been suspended.

That is a big deal.

ECJ court ruling today means for now govt cannot issue capacity market payments to energy firms or hold auctions

12.32pm GMT

Fears over political instability hit a sale of UK government bonds this morning, with the country's debt agency forced to accept lower than usual bids, to an extent not seen since 2009 in the depths of the financial crisis.

Reuters reports:

12.12pm GMT

Germany's BDI industry association has given a gloomy assessment of the current state of play, warning that firms should still prepare for a chaotic Brexit.

A hard Brexit would be disastrous. It would put tens of thousands of companies in Europe and hundreds of thousands of employees on both sides of the Channel in big difficulty.

11.42am GMT

While talk of Theresa's May's Brexit agreement may rapidly date as the day goes on, here is the reaction from the UK car industry, which has repeatedly argued that thousands of UK jobs would be at risk without frictionless trade in Europe.

For the automotive industry, Brexit is about damage limitation. The outline agreement is a positive step in avoiding the devastating consequences of 'no-deal' and securing a transition period.

It is, however, only a first step and business seeks certainty and ambition when it comes to securing a competitive future. Truly frictionless trade is the only way to ensure the industry's future success, and this should be the objective for all parties as we move into negotiating the permanent UK-EU relationship.

11.16am GMT

What started out as a sea of green across European markets this morning has turned into a sea of red.

When traders arrived at their desks this morning, there was a sense of relief after Theresa May survived a crucial cabinet meeting on Thursday with ministers backing her draft Brexit plan.

11.02am GMT

Craig Erlam, analyst at currency firm Oanda, says the "crazy" trading we're seeing is likely to persist today:

It's been a crazy start to trading already this morning and with the Brexit headlines likely to continue throughout the day, I don't expect that to change.

What was meant to be a day of celebration for Theresa May after she received backing from her cabinet for the Brexit deal could quickly turn into a day of hell.

10.47am GMT

Here's what happened to the value of the pound against the dollar when Dominic Raab tweeted his resignation at 8.53am:

10.35am GMT

What now for the pound? As Garry White from Charles Stanley points out, ING have a few thoughts:

ING's GBP forecasts in different Brexit scenarios. Glad I don't have any holiday plans. pic.twitter.com/FYNc1bfjdN

10.13am GMT

The FTSE 100's earlier gains have been wiped out after Esther McVey became the second cabinet minister to resign this morning over the draft Brexit agreement.

McVey said in her resignation letter:

We have gone from no deal is better than a bad deal to any deal is better than no deal.

Earlier this morning I informed the Prime Minister I was resigning from her Cabinet pic.twitter.com/ZeBkL5n2xH

10.05am GMT

Investors have been dealt another blow to confidence this morning, after the latest figures showed UK retail sales fell unexpectedly in October

Retail sales slowed after a buoyant summer with the mild autumn hitting winter clothes sales. Household goods sales also fell in October following two consecutive months of strong home improvements sales.

Consumers chose to purchase goods from many stores' websites as online sales continued to increase.

9.52am GMT

Neil Wilson from Markets.com says the drop in the pound is as drastic as it might be, given the circumstances:

Govt is up for grabs but pound not sinking. Still at $1.28, within recent range. Still reflective of binary upside/downside risks in play #Brexit #GBPUSD

9.41am GMT

The UK-focused FTSE 250 is down 0.9% after the Brexit secretary Dominic Raab resigned, just hours after Theresa May secured the backing of the cabinet for her draft agreement.

Investors are feeling edgy now, as they digest the latest Brexit twist and consider it a negative for UK firms as it creates greater uncertainty.

9.21am GMT

Follow our politics blog for all the latest reaction to Raab's resignation:

Related: Brexit secretary Dominic Raab resigns, saying he cannot back May's deal - Politics live

9.05am GMT

Here is Raab's resignation letter:

Today, I have resigned as Brexit Secretary. I cannot in good conscience support the terms proposed for our deal with the EU. Here is my letter to the PM explaining my reasons, and my enduring respect for her. pic.twitter.com/tf5CUZnnUz

9.02am GMT

Those losses have just widened significantly after news breaks that Dominic Raab has resigned. Backlash starts here?

Sterling is off 1% against the euro and the dollar at a1.1377 and $1.2864.

8.50am GMT

Currency traders are wary this morning, putting the pound under pressure as investors digest the considerable challenges that still lie ahead for Theresa May.

The pound's earlier gains against the dollar have been erased, and it is now down 0.3% at $1.2952.

8.25am GMT

There are no wobbles across Europe's key markets this morning, including the FTSE 100 which is up 37 points.

The latest scores:

8.19am GMT

The major business lobby groups have welcomed the news that Theresa May clinched the support of her cabinet, but acknowledged it was a compromise agreement and some key risks remain.

Here are some of the key responses:

This deal is a compromise, including for business, but it offers that essential transitional period as a step back from the cliff-edge.

The UK has had many months of discussion and division. A long journey still lies ahead but now is the time for decisions. And the first decision is to avoid no deal.

We urge all politicians to think long and hard about how they react to this first-stage agreement. Leaving the EU without a deal is a very bad outcome for businesses, workers and consumers, and this is simply an inherent risk that comes with voting down any withdrawal deal.

Our members will adjust to a new relationship with the EU, but they must be allowed to do this in as smooth and orderly manner as possible.

Businesses will recognise the huge efforts made by the Prime Minister and across government to reach this milestone.

After two and half years of uncertainty, this may be end of the beginning - but not yet the beginning of the end. Our firms need clarity and precision on the specific terms of trade they will face in future, many of which are still to be agreed. The avoidance of sudden or multiple changes to trading conditions is crucial to business investment and confidence.

7.50am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The pound received a slight boost this morning as traders, firms, politicians and commentators consider what lies ahead after Theresa May gained cabinet backing for her draft Brexit plan.

Sterling traders had to endure another turbulent session on Wednesday as Prime Minister Theresa May tried to pull together the various disparate views of her cabinet in trying to sell the agreement with the EU over the thorny issue of the Irish border, as well as the outlines of the future trading relationship.

While she was able to achieve what she called collective approval from her cabinet to accept the deal, the gritted teeth consensus could well be tested in the coming days, and appeared to be reflected in her tired demeanour, almost as if to brace for the whirlwind that is about to come her way in the next few days, as various cabinet members come under pressure to resign.