More GBP volatility ahead

The EU October summit has now been and gone with Brexit negotiations in exactly the same tangle as before the summit. Theresa May has tried extending the transition period beyond December 2020. This move was rejected by a wide range of political players from hard, soft brexiteers, the DUP (The N.Irish support for May's Gov't), and the SNP. It was seen as a simple play for more time and widely criticised. Furthermore, at the end of the European session on Sunday Bloomberg reported that Theresa May is prepared to agree to a fallback arrangement for the border between the UK and N.Ireland. See Adam's report on that here. This led to a bid in the GBPUSD pair which found offers at the 1.31000 region and the 100EMA on the 1 hour chart. This was in part due to the problem that It will become very hard for Theresa May to persuade her own party to keep backing her in the negotiations.

Well, can May do it? I'm not sure.

A number of Tory backbenchers are demanding a meeting with Theresa May. Sky News reported yesterday that Theresa May has, 'just 72 hours to save her job'. See here.In order to trigger a vote of no confidence here is what is necessary:

The 1922 Committee (This is an influential committee of all backbench Conservative MP's which meet every week when the House of Commons is sitting to discuss the party's frontbenchers) chairman must receive 48 letters from Conservative MP's. By Wednesday that number could be reached quite easily.

The Vote for no confidence.

There needs to be 156 votes to win the no-confidence vote. Sources have been reported as saying that around 100 MP's would vote against May.

So, here is the dilema- there is enough dissent against May to call a vote of no confidence, but not enough to win it. Furthermore, if a vote is called and fails; another vote can't be called for another year under party rules. So, timing is everything. Now is the moment for people to act to get rid of May, so if a vote is called some MP's sitting on the fence might decide that it is now or never to displace May.

So, for us as traders, we need to have our ear to the ground for what happens at the 1922 committee this week. If a meeting is called, and May attends, and it goes badly this could be the moment May is replaced. Any hint of this direction will be GBP negative. Stay another day by East 17 seems apt. ;-)