For this old time analyst its nice to see that fundamentals still can drive volatility. Falling letters, cough, and fake P45 form, not only weighted on UK PM May but sent GBPUSD 1 month implied volatility higher at 8.66 and GBPUSD down 2% (4% since the Conservative party conference). PM May now face open rebellion among backbenchers as up to 30 MP are reported have called for her resignations. Senior Conservative have rallied around the PM making the outcome uncertain. The political chaos makes the outlook for Bexit negotiations re-opening next week bleak.
EU negotiations are questioning the authority of the UK governments, already looking ahead, and limiting the prospect of a deal. Should EU-EU fail to make meaningfully headway, the UK economy is likely to suffer as business investments is further delayed. Given the prolonged negative outlook for the current situations (PM May need to secure her positing so markets can move forward), we are bearish GBP. We anticipated a bearish extension of current downtrend to 1.2830 based support.
By Peter Rosenstreich