- As much as 40 Conservative members have reportedly signed a letter of no-confidence
- EU Brexit negotiator Barnier warns about a collapse of Brexit talks, the bloc is drawing up contingency plans for that scenario
- GBP drifts lower in early trading being the most beleaguered currency in G10
We’re beginning the new week with the weaker pound which is driving lower on the back of growing opposition which PM Theresa May faces in the Parliament. There were some revelations during the weekend that as much as 40 Conservative members of the British Parliament agreed to sign a letter of no-confidence. Let us remind that a group of May’s opponents has been growing for some time (there were around 35 names on the list after May’s disastrous conference speech) and now it’s just 8 lawmakers short of what’s needed for a leadership challenge. That said, if additional eight members join the group, it would trigger a vote of no-confidence which in turn could force PM May to step down and then a Conservative leadership contest would take place.
These unpleasant remarks from the British political scene came as the EU’s chief Brexit negotiator Michel Barnier said during the past weekend that the block was drawing up contingency plans for the possible collapse of Britiain’s departure talks. He added that even as a no-deal scenario isn’t a preferable outcome they have to take it into account and if it happens it could afflict members states and businesses alike. Let’s recall that Barnier gave the UK a two-week deadline to provide greater clarity on the financial settlement (the EU estimates it would reach about 60 billion EUR) it was prepared to offer as a part of the divorce deal. Member states are to decide at a special meeting in mid-December whether a sufficient progress has been made and if it hasn’t the EU could postpone talks until February or March of the next year.
As a result, the British pound is under severe pressure in early trading and it’s losing 0.6% against the US dollar. Notice that the weakening position of PM Theresa May might cause that the final deal of Brexit negotiations could be less supportive of the UK’s side. Technically the GBPUSD is declining but it still remains off a key support zone placed at around 1.3030. Once this zone is ultimately broken, it could commence a deeper pullback. At last, keep in mind that the GBP will have a tumultuous week as many relevant macroeconomic readings are scheduled, inflation and labor market reports are among them.