What has been speculated more and more in recent days has finally been realized. British Prime Minister Theresa May resigns. The lack of ability to unite the deputies and vote for her Brexit plan clearly showed that there must be specific political changes to push Brexit forward.
Theresa May announced today that on 7 June she would step down from the position of the leader of the Conservative Party, but she would remain in the position of prime minister until the new leader was elected. The GBP/USD slightly increased, trying to break 1.2700, for which algorithmic orders could have been responsible. The successor of Prime Minister May will have to find a consensus in the Parliament regarding the Brexit, that is, to do the thing that the current Prime Minister has failed. Meanwhile, Labor Party leader Jeremy Corbyn once again called for new elections. In turn, the most likely next Prime Minister may be Boris Johnson, a person who may try lead to brexit at any price. This in turn may increase the chance for the so-called hard Brexit.
The interest rate market also reacted to the decision of Theresa May today. Investors seem to have lowered their expectations regarding any actions of the Bank of England in the context of interest rate hikes due to ongoing uncertainty about Brexit.
To sum up, the market has been preparing for political changes for a long time, which in the last dozen or so days could have been reflected in the systematic depreciation of the British currency. Now the most important question is who will replace Theresa May as Prime Minister and what Brexit strategy will adopted.
Chart: GBP/USD, H4. Conotoxia trading platform.
The GBP/USD chart showed a corrective movement, after a systematic decline of the pound, for which the nearest resistance may be set by equality to the previous corrective movement. It coincides with the 23.6 percent Fibonacci retracement at 1.2735. Another resistance may be set by previous support – 1.2863.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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