UK PM May survives no confidence vote

The Prime Minister has survived the vote of no confidence in her leadership, though this in reality changes little.

Union jack
Source: Bloomberg

The vote, 200-117, was not a thumping result for the PM, and while it means she remains in place, it is clear that her authority has suffered a blow, especially given that it required a promise that she would not stay for the next election. The GBP had already rallied in expectation of the result, so the drop back from the highs is not surprising. But now the focus for sterling goes back to Brexit, and there the outlook is not at all promising.

Now that the vote is out of the way, we can go back to where we were 24 hours ago, and this is no comfort for investors. There is a deal ready to go, but it is still not going to pass Parliament. Thus, while the PM cannot be challenged for another year by her own party, she will not be able to get the deal through unless the EU grants some concessions. In previous incidences of popular discontent with the EU project, the bloc has provided some concessions, so we may see this again. However, it is still far from clear that Parliament’s various tribes will back any changes. The UK’s future, with the clock ticking down, is still very uncertain.

GBP/USD rallied all day, but this meant the news was very much ‘in the price’. Now, in admittedly thin trading, we are seeing cable move lower. This looks like a bearish rally, providing a fresh opportunity for shorts to target $1.25 and below, as the market realises the difficult outlook confronting the UK:

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IG Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.