Buckle your seat belts, this could get bumpy
In February this year Theresa May was playing chicken with the EU. Here is the piece I wrote at the time. Theresa May blinked first. To be fair to May the odds were always stacked against her. She had to ride solo into Europe, take on 27 member states in a high stakes political face off and not flinch first. All this for her country she wanted to serve. However, in her hearts of hearts she was not a Brexiteer. At last she can take a break from it all. She had voted to remain and would have preferred for the country to do so. Is it any wonder that she flinched first? Not really. Boris Johnson is a different figure. He is not averse to creating the odd car crash to get what he wants, and he is now behind the Brexit wheel.
The GBP is convinced Boris won't blink first
The strong sell off in the GBP is the market saying that they believe Boris will crash the UK out of the EU...if he can. So, now for the first time in Brexit negotiations, the EU are faced with a choice, 'Do we watch Boris crash the UK out of the EU, or do we try and re-negotiate'. Of course they will re-negotiate something, if not the whole agreement, but will it be enough? Cable has fallen heavily since the start of the week and the Fed may accelarate falls further if the Fed acknowledge the recent flow of good data and switch to a more data dependent footing going forward strengthening the USD. Needless to say, the GBP remains a sell on rallies. If indeed we get many.
