Home Daily Commentaries May in fight of her life to save job

May in fight of her life to save job

Daily Currency Update

The rumour yesterday that 48 MPs had written letters of no confidence to Sir Graham Brady, Chairman of the 1922 Committee, has been confirmed this morning. Whilst travelling Europe to renegotiate her Brexit agreement and the Irish backstop it would appear that Theresa May has let her eye off the ball at home. This is the news that May would have been dreading and despite Jacob Rees Mogg rallying his troops over 3 weeks ago it would appear that Monday’s decision from May to postpone the Meaningful Vote has galvanised proceedings. This move has seen the pound slip and retest the 20 month lows seen at the start of the week. Ballots will open tonight at 1800 GMT and remain open for two hours and May will need to secure the support of 158 Tory MPs in order to keep a hold of her job which she is set to fight for. If she looses tonight’s popularity vote then a full blown leadership challenge will take place and the UK could have a new Prime Minister by the end of the week. If she wins tonight’s vote she faces immunity and can’t be challenged for a year (presumably she will also win a meal for her campmates tonight).

Key Movers

US President Donald Trump tweeted yesterday that there were ‘very productive conversations going on with China! Watch for some important announcements’. The road throughout the trade war has been rocky but a path is being carved out, even if a few speed bumps have been hit along the way. The hope that real progress is being made and alongside the fact the China have indicated that will reduce and remove tariffs on American cars has seen sentiment move away from risk and the dollar to sell off slightly. EUR/USD as a result tested 1.1400.

The rhetoric from Italy around their budget has stepped up considerably this week with Italy’s Di Maio yesterday announcing that the next few days will be crucial. It is very much the case as well that Italy are calling double standards pointing out that France will fail the EU’s budget rules given Macron’s u-turn and relief on fuel tax rises alongside the promise of increasing the minimum wage.

The Aussie dollar took relief from the comments yesterday from Trump regarding progress with China. This was further supported by the news as well that Huawei’s CFO Meng Wanzhou is to be released on bail. Looping back to the US-China trade war, this is further proof and indication that slow progress is being made.

With the small rise in oil prices the Canadian dollar followed suite. Oil prices climbed 1% on the expectations that OPEC could cut its output in 2019, stabilizing demand and supply. USD/CAD is still near its 18 month highs but this news from OPEC could add more strength to the Loonie.

The Kiwi largely followed its Aussie neighbour yesterday, buoyed by the news that China-US relations eased. The Kiwi gained against the US dollar as risk sentiment waned whilst against the pound the Kiwi’s performance was driven by events in the UK.

Expected Ranges

  • GBP/USD: 1.2480 - 1.2570 ▼
  • GBP/EUR: 1.1025 - 1.1200 ▼
  • GBP/AUD: 1.7320 - 1.7520 ▼
  • GBP/CAD: 1.6660 - 1.6820 ▼
  • GBP/NZD: 1.8250 - 1.8380 ▼