The big news today is that Prime Minister Theresa May has announced, as widely anticipated, to step down on June 7 as Conservative leader. The news came as no surprise and in all honesty it looked inevitable. She had lost the support of her party, with a record number many MPs quitting in protest to how Brexit was being handled over the past three years. May’s departure means more uncertainty over UK politics and Brexit.
The pound’s instant reaction was a negative one, suggesting investors now think that May’s exit has either increased the odds of a no-deal Brexit or that it could mean there will be further delays in UK’s departure from exiting the EU. Going forward, the pound could drift aimlessly as investors await fresh Brexit direction. I suspect the pound will only be able to rise meaningfully should the probabilities of a second referendum increases. However, if a pro-Brexit Tory leader is elected, such as Boris Johnson, then this could lead to further declines for sterling. But essentially it will be a wait-and-see situation in the very short-term outlook and the pound could see short-lived spikes here and there.