GBP/USD fell to a low of 1.2478 before jumping to a high of 1.2550 and is back down again to 1.2520 levels now
Despite a leadership contest being called upon, things are far from clear at this point. David Lidington is the latest to offer his public support for Theresa May following the earlier pledges here and that is helping to breed some confidence that the contest won't be a straightforward affair that will end up with May on the losing side.
That is giving some hope for the pound that things aren't as bad as they seem but the picture is still very much muddied at this point. Do be reminded that this vote here is for the Tory party leadership and if May loses it, she will most certainly also step down as prime minister but to do so, there has to be a credible candidate willing to run in her place. As of yet, there isn't and this could result in a constitutional limbo.
And also let's not forget that this could also evolve into a parliament motion of no confidence where a general election could also be called. Aside from the above, there's also the distinct possibility of having a Brexiteer Tory prime minister in charge or even a no-deal Brexit to follow and those two outcomes are possibly the worst ones for the pound.
There's just so much potential scenarios that could pan out currently that it is making traders indecisive as to which one to latch on. Expect the pound to waffle more around current levels as the day goes by before we get more clarity on how the situation will unfold.
