GBPUSD, H1, Daily
UK Prime Minister will face a no confidence vote in her leadership between 6 and 8 PM London Time (18:00 and 20:00 GMT) with the result known, probably, by 21:00 GMT (NY close). She will need to win a simple majority of the 315 Conservative Party members of parliament, so 158. The vote has been triggered by the support of at least 48 (15%) Conservative MPs, the minimum required to stage a confidence vote (the process is blind, so the exact number is unknown). The trigger was the PM’s decision to delay the parliamentary vote on Brexit. It’s not clear if she will lose as many MPs are expressing concerns about the timing of staging a new leadership election at such a crucial juncture. If she loses, it would take until at least mid-January or early February for the Conservative Party to select a new Prime Minister, which would leave insufficient time to renegotiate with the EU and then ratify a new deal ahead of the UK’s official EU departure date on March 29. This would need an extension in Article 50 period before leaving. This scenario would greatly increase the odds for Parliament to take control of the Brexit process as there is a legislated deadline to ratify a deal by January 21. The best guess is that May will survive the vote with the Withdrawal Agreement deal still failing a parliamentary vote, and ultimately there could still be a new referendum and even a general election. In the scenario May loses, expectations are for the Pound to fall sharply.
As with all things market related, the gossip of the no-confidence vote (the hype) has sent the Cable below 1.2500, last night and again this morning. The official announcement (the news) saw Cable rally from 1.2475, 22 month lows, into the daily pivot at 1.2535. The daily chart remains weak, it has been below its 20-day moving average for 18 trading days, the Parabolic SAR has been negative for 22 trading days and the RSI is still not yet oversold at 35.4. Resistance moved higher and sits at S3 and the Bollinger band mid-line is at 1.2745.
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Stuart Cowell
Head Market Analyst
HotForex
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