Theresa May’s position as Prime Minister is under threat as at least 48 Tory MPs have submitted letters today to the Chair of the 1922 Committee to initiate a vote of no confidence. The vote will take place later today and a decision is likely to be announced as early as this evening.
Immediately following the news, there was volatility seen across GBP pairs with GBPUSD rapidly losing 30 pips off its price, however, this has recovered for now and the market is gradually picking back up as it finds a small amount of stability.
Should the vote of no confidence be supported by an overall majority then Theresa May will be forced to step down from her position. The reason for this vote is likely due to the fact that Conservative MP’s believe that someone other than Theresa May would be better suited to secure a beneficial Brexit deal for the UK in the longer term, however, this move would be nothing less than catastrophic for Brexit negotiations in the short term.
A drastic change in government at this stage provides even more uncertainty moving forward and will undoubtedly mean that Brexit negotiations are pushed back even further, with the potential of even having to suspend the article 50 deadline.
Sterling is finding strength in the markets today as it consolidates its losses from this week. Having said this, there is massive potential for further downside so all eyes on the outcome of the vote later today to give insight into just how much the pound could suffer over coming days/weeks.