With Theresa May’s leadership being challenged after the resignation of two cabinet ministers and countless rumours over the future of Brexit, Short GBP/USD?
British Brexit Secretary Dominic Raab – a keen Brexiteer and self-declared Thatcherite, and the successor of previous Brexit Secretary David Davis (who vacated the post in July) – has resigned. Raab said in a statement on Thursday that he "cannot in good conscience support the terms proposed for our deal" to leave the European Union.
Work and Pensions Secretary Esther McVey resigned about an hour later, saying the draft deal does not honour the result of the Brexit referendum in 2016. There were more resignations at the junior level from Prime Minister May's government, and an open call from one leading Brexit supporter for May to resign.
Despite the draft deal having the support of the EU, it does not have the support of her own government. Raab’s resignation raises issues shared by many of the other members, including the regulatory regime for Northern Ireland, which poses a serious threat to the integrity of the UK and a deal where the EU holds a veto over the UK’s ability to exit.
Furthermore, MP Rees-Mogg's call for a no confidence vote could also spell the end of May's role as prime minister. Rees-Mogg, who has been touted as a possible future leader of the Conservative Party and heads a pro-Brexit faction, said May’s deal was “worse than anticipated and fails to meet the promises given to the nation by the prime minister.”
Sterling recovered slightly after May acknowledged some were not happy with the compromises made to secure the deal but said it "delivers what people voted for and it is in the national interest." She also vowed to "see this through."
In our opinion, as long as GBP/USD is below 1.2850 price level, it could continue to trend lower to 1.2700.
Fullerton Markets Research Team
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