No Confidence in May? Cable Rollercoaster Continues

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Market Drivers November 16, 2018
May projects confidence on radio
Dollar weaker across the board
Nikkei -0.57% Dax 0.59%
Oil $57/bbl
Gold $1217/oz.
Bitcoin $5600

Europe and Asia:
EUR EU CPI

North America:
USD Industrial Production 9:15

Another whipsaw night in cable as the battle for Brexit continues with PM May struggling to stay afloat amidst rumors of a no-confidence letter in the offing.

Pound first saw a rally to 1.2835 after PM May projected a tone of confidence during an early morning radio appearance assuring the audience that her deal was the absolute best Brexit compromise that UK could achieve. She talked confidently of moving the agenda forward and shepherding the deal through Parliament.

However, as soon as she finished her remarks rumors began to surface that Tory MPs may have enough votes – 48 are needed – for a letter of no confidence that would force a vote in Parliament. If the rebels within her ranks really do have the votes to force a no-confidence motion UK politics will be thrown into an even greater existential crisis. Even if PM May were to survive the vote, it would almost certainly suggest that a general election will be called as Ms. May’s minority coalition partner the DUP vehemently opposes the current deal and will likely leave the government.

The prospect of a general election ahead of the Brexit deadline in March would only create more chaos in what is already a highly volatile situation. The initial reaction in the market would likely send cable towards the 1.2500 level. Still, even total pandemonium in UK politics may not prove deadly to sterling if it ultimately results in a call for a 2nd referendum. For now, that appears to be a very long shot as the current deal or some variant of it is still the most likely outcome of negotiations, but headlines changing by the hour, the trade in sterling remains turbulent.

Meanwhile elsewhere, the action is placid with dollar notably weaker across the board. Today the North American calendar is barren, but any weakness in equities could see USDJPY test 113.00 support as the day proceeds.

Boris Schlossberg
Managing Director

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