In this live commentary, the presenter reports Theresa May’s official resignation and outlines the immediate reaction of the British pound (GBP/USD). The pound initially rallied on expectations of continuity, as May pledged to stay until June 7, but then fell as the focus shifted to the upcoming Conservative leadership contest and the likelihood of a Brexiteer successor, raising short‑term no‑deal Brexit risk. The speaker analyses longer‑term technical levels, noting a downtrend from around 132 to the 126‑127 region and highlighting a key trend line from late‑2018/early‑2019. He then explains the Conservative Party leadership election process, including MP proposer requirements, elimination rounds, and a postal ballot, and points out the parliamentary summer recess and the October 31 deadline that could affect the timeline. The bookies’ favorites—Boris Johnson, Dominic Raab, David Lidington, Michael Gove, Jeremy Hunt, and Andrea Leadsom—are listed with brief historical notes. Concluding, the presenter maintains a negative bias for sterling, expecting further downside pressure despite the initial brief upside.
Chapters
Okay, so the latest breaking news, we just had Theresa May officially confirm her resignation and setting out the timetable of her departure. So just having a quick look at the pound and how it's reacted on the back of this breaking news, obviously largely anticipated. The press have been coming down on her all week, rumors have been rife and so on. But looking at how the, the pound's reacted, obviously pricing this in and the risk of who could this lead to. Obviously, BoJo, Boris Johnson, being the most obvious next choice and the bookies' favorite, we'll look at in a second, has kind of led to the pound moving lower. And just having a look then at how the pound's reacted, if I put this— this is sterling-dollar on a 1-minute candlestick, just so we can make sense of some of the actual pound reaction as she was delivering what was about a 10-minute speech. Fairly emotional at the end, turning her to tears. But having a look, the pound actually initially started to rise. Now, I think personally that was down to the fact that there was a risk that potentially she could have just resigned and that's it, hand in the keys to Number 10 tonight, see you later, goodbye. If that happened, that would be the most negative That was a possibility, small, but would have been the most negative immediately, i.e., that would have thrown the whole thing into disarray because a prime minister can't just turn up the next day. Boris Johnson hasn't won it just yet. You have to go through a very structured process which takes a number of weeks, months to complete before a new Tory leader can be appointed. So I think that initial rally was the fact that there's going to be a little bit of continuity. She said she's going to stick around till June 7th. That does then encapsulate the Trump state visit that's happening. I think it's on the 3rd of June. And then it means that a Tory leadership race will commence the week after the 7th. So she's going to kind of stay in place for the coming days. So I think that is what led to the kind of initial relief, if you like. But the move that's happening now, I think, is the more telling one. And I think it's the one that probably will prevail overall. And that is the pound's quickly come back off and we've continued to move back lower because now obviously attention turns to the fact that now she's confirmed it, the race is on and inevitably the next prime minister is more than likely going to be a Brexiteer. And that by default increases the risks of a no deal, even though the prospect of that happening given the composition of Parliament, is still incredibly unlikely because even though Boris Johnson might talk a big game about keeping that weapon on the table, ultimately with Parliament as it stands, he's going to run into exactly the same obstacles Theresa May has done. Not unless there's a new snap election called and he's able to command a more sizable majority. To tip it in his favor in that respect. So all of this equates to political uncertainty, short-term increasing risk of no deal now that it's been confirmed. I mean, the reason why the pound isn't just dropping like a stone is because, don't forget, the pound's been decreasing all week, and so this isn't a complete surprise. The market's already been repricing for this new kind of outlook so to speak. These were some of the longer term levels. This is looking on a daily continuation chart, uh, and you can see here this, there's a really key kind of long, longer time frame trend line with the lows that were printed back at the end of last year and the beginning really of 2019 to watch. That's around the 126 handle. But don't forget, you know, this is what I'm talking about here. This is looking over the last kind of, I guess, month or so, the pound has gone from a 132 to a 126 or 127, and that largely is this repricing for what we've just had occurred. So inevitable in a sense, and so the actual market reaction contains somewhat, but would be expecting these lower bound levels to potentially be tested sooner rather than later. A few things then to have a look at quickly, uh, just before I wrap things up. This is the electing a Conservative Party leader process. So this is when, uh, what will happen from the 7th of June. So stage 1, 2 MP proposers needed. There were some talk about a week and a half ago of apparently 17, I think it was, Conservative members who might throw their hat in the ring and have a go at running for the prime ministerial position, that would mean you'd have to go through quite a, quite a protracted period of going through this elimination process to whittle it down to basically the final two candidates, of which then it goes into a postal ballot of wider Conservative Party members to vote, and they choose their leader. Now, from a time frame point of view, this is the UK Parliament website, and one of the key things here from a date perspective is going to be here, the current recess period. So when the House rises, when it returns, and so on. So this will be something we'll need to keep an eye on because typically we have a summer recess, and this means then that come kind of July time it's going to be, you know, do we have a Prime Minister in place in time before that? Because obviously we have this deadline on October 31st, and the longer this takes, and if for whatever reason it's delayed, then this is going to mean that it's probably going to lead to an extension of that October 31st, or snap general election, for example, could, could start to increase. So Who is the bookies' favorites as her replacement now that she's committed to go? Obviously Boris Johnson has been a favorite now for some time and continues to be the case, and he's been very vocal that he is going to be, going to be going for it. However, I must remind you, back in 2017 he also said the same thing and he did pull out, even though he was somewhat stabbed in the back by Mr. Gove. But Dominic Raab, number 2, David Livingstone, number 3, Michael Gove himself, number 4, and Jeremy Hunt, number 5. And then obviously Andrea Leadsom, who was kind of the final nail in the coffin for Theresa May earlier this week. She's the 6th favorite to replace as Tory leader. So yeah, all in all, Theresa is gone. I'm sure history will have to wait to see how her performance really stacks up once we know the outcome in years to come of what Brexit actually— and if it materialises— to whether or not if she handled this— was it the biggest missed opportunity of all time for Brexit to be delivered? Has just walked out the door, or was this the best thing for that, um, that democratic vote to be delivered? I guess time's going to tell. But from a trading point of view, fairly contained, a little bit of an initial move higher, then reversed, which I think is the more logical move after the initial move up was a pure kind of taking off the table the fact that there wasn't an immediate removal. And so now I would continue to expect a quite still a negative bias for sterling going forward. All right, thanks very much.
