No free fall yet for the pound
Cable is still finding some form of lifeline around the psychological level at 1.2500 currently as the headlines continue to turn sour for the pound. The rumour mill was in overdrive last night as news on the 48 letters continued to hit the wires, prompting traders to consider that a no confidence motion is set to be tabled against Theresa May over the next 24 hours.
As May was travelling overseas yesterday, no official announcement was made but the focus will turn to Westminster later to see if we'll hear of anything substantial after all the reported headlines overnight.
For the pound, headlines of a leadership challenge will only throw further uncertainty into the air. But it will all boil down to Theresa May's chances of winning and who the candidates to replace her will be if she suffers a defeat. Adam has a good preview on that here.
As for a technical perspective on the quid, GBP/USD looks to have found some reprieve around the 1.2500 handle for now but it's a slippery slope to the downside once the figure level gives way. Further support is only seen around 1.2350 before the 1.2300 handle comes into play and then it's a move towards the March 2017 low @ 1.2110.
The pound's saving grace here is for May to pull off a miraculous victory, which is seen as unlikely as those challenging her would not trigger a no confidence motion unless they are certain that she will be defeated. Given that, traders will have to look next towards who the candidates will be and what sort of Brexit they will be aiming for in order to decipher if the following move in the pound will be up or down.
