Davis quits, Johnson quits but the cable bulls don't quit
Theresa May is having a tough time holding her government together. Her party is divided into hard-and-soft Brexit factions and she has the impossible task of keeping them on the same page.
After cracking heads last week, she managed to pull together a compromise that united most of cabinet but just two days later, she was hit by the resignation of Brexit negotiator David Davis, two junior cabinet ministers and now foreign secretary Boris Johnson. Along with that, Germany gave an immediate thumbs down to the latest Brexit proposals.
That kind of turmoil would have wrecked GBP a few months ago but today it's down just 30 pips to 1.3250-- and earlier touched the highest since June 14.
One take is that Davis leaving clears the way for a softer Brexit and that might be the right call but something has been brewing before this latest whipsaw. Negative Brexit headlines haven't been having the same effect while economic data and central bank chatter has become a tailwind.
To me, it looks like the buyers are buying the Brexit dips in anticipation of a rate hike and better economic news. That's a recipe for a sustained bounce.
