The latest political news over the past 24 hours has had huge repercussions as the whole Brexit saga seemingly draws closer and closer to a final outcome. The question on most peoples’ minds is what will that final outcome be?
Will the conclusion to all this now lead the UK to a ‘hard Brexit’ or perhaps prior to that; a Tory leadership challenge, or subsequently even a general election and perhaps even a second referendum vote?
Well, all of these potential outcomes are very hard to predict, but in my view one that isn’t, is that Teresa May’s days’ look extremely numbered as she is becoming increasingly isolated within her own party and her position, as of this morning, is surely now untenable.
What is more distasteful to many is the way in which she has completely back tracked on what she had repeatedly advocated before. Whilst she might feel this sea change may have been her only pragmatic option; the Brexit draught agreement is black and white proof of her throwing in the towel. In the process, all she has managed to achieve is to please absolutely no one, on all sides of the political divide in the UK.
The pound, which was extremely volatile yesterday, until the initial news of a cabinet agreement had been reached, has nowslumped on the news that the Brexit secretary, Dominic Raaband others are quitting the front benches by the hour this morning.
As I write the GBPUSD is falling ever closer towards 1.2700, having started the morning above 1.3000. The GBPEUR is falling equally hard as well after it traded to as high as 1.1520 earlier this week. Well, the price is heading rapidly back to 1.13 now and looks set to fall further.
Consequently, technical support around 1.2700-10 against the dollar is looking vulnerable to a break and if that happens,then the year’s low at 1.2662 could very quickly give way as well.
Meantime, the voices calling for a second referendum are shouting even louder today and whilst that still looks a remote possibility in front of an increasingly likely ‘hard’ exit; it shouldn’t necessarily be entirely discounted. Ironically, should the chances of a second referendum gain more traction, then it could actually be the one thing that might eventually save the pound.
That would of course be more so the case if ever such an event duly overturned the outcome of the first vote.
However, that outcome is still not my view and this total political mess looks increasingly unlikely to end well and only endorses my longer term outlook on where this might all end up with respect to the currency. You can refer to my article from 26/10/18 for a refresh on that.
My biggest fear on all this, as I have mentioned before, is where it will lead us and that fear is of a general election and one that may not deliver another conservative government.
They say a day in politics is a long time and I would imagine its surely going to be a very long day indeed for the Prime Minister.