May in the saddle, for now.
There is no doubt that the UK is in a pivotal point of their Brexit negotiations. May has tried to please an impossible array of people from those who want complete ties cut with Europe (the hard Brexiteers) and with those who would rather Britain had never left the EU (the remainers).
Yesterday saw the pound bounce around technical levels for the GBP. See the 4 hour chart below for price bouncing around the 200, 100 MA and the overhead resistance). Initially the GBP rallied out of Sunday's open on the hope that a soft Brexit was accepted by the Cabinet and no major players seemed ruffled. The minister in charge of Brexit, David Davis, resigned which was a blow, but not seen as critical to May's plan. His Brexit vision was different to May's 'third way' approach and he had misgivings about the policy as a whole. .After a game of 'where's Boris?' Boris Johnson resigned and this soon prompted rumours that Boris leaving is going to precipitate a leadership contest within the conservative government. As things stand, there has been no confidence vote against May. There needs to be 48 conservative MP's who write a letter to trigger a vote of no confidence. There then needs to be more than 50% of the 316 parties MP's who need to be vote in order to oust May. As of today, that seems unlikely as she has a pretty good grip on the party.
As of today... but things can change quickly and they will. This is going to get messy too as Robert Peston, a respected British Journalist and political editor, reported that Downing Street 'spiked' Boris's resignation by announcing he was quitting before he had finished writing his resignation letter.
Also last night , there were reports of 80 Brexit Tory Rebel MP's gathering together at a European Research group.
There may be trouble ahead. May is not going without a fight. However, the key aspect in all of this will be how does Europe respond to the white paper? If they are very negative about the proposal then it will take an enormous effort for May to stay in power. May is a resilient leader, but everyone has their breaking point and that would most likely be it.
Now the current plan is for May to release a White Paper on Thursday which will outline her 3rd way proposals.
So, the trade is to keep an eye out for headlines and use technical levels for targets and stops.Look out for European comments on the proposals in particular as well as a vote of no confidence for May. That would give some decent downside pips for the GBP/USD. Also, bear GBP/CAD in mind with the BOC expected to rate hikes tomorrow. Have a good day folks.
