It’s starting to be more of a political fracas than a Brexit one for the pound
Price has recovered a little to move back above the September low @ 1.2786 but I must say that so far sellers have been lenient in not driving the pound much lower after yesterday’s mess. It could owe to possible hints that a lot of the bad news have already been priced in and short positions are still stretched but there’s still so much room for things to get worse for the UK and the pound in the coming days/weeks.
The focus now is entirely on Theresa May and whether or not she can survive further ministerial resignations and a possible no-confidence motion being tabled against her. As for resignations, the key one to look out for as we head into the weekend is Michael Gove — after he reportedly turned down the offer to replace Raab as Brexit secretary.
May has been adamant that she wants to stay on and fight the good fight by pushing forward with her Brexit deal and quite possibly why the pound isn’t headed lower is because there are no potential candidates in the offing to replace her at this point in time.
That means there is still a distinct possibility that parliament members may cave in eventually if there is a strong realisation that there can be no better offer on the table. But that is still something that will be debated over the next few weeks.
For now, things look like they will still get worse before they get better for the pound. The real slippery slope for cable is a break of the year’s low @ 1.2662. That opens a move towards 1.2500 which is a key psychological level for the time being.