May’s cabinet is changing its course. After the departure of David Davis, former Brexit Minister, it is the turn of Boris Johnson, Foreign Secretary to step down later in the afternoon. As both Brexiteers were the largest advocate of a hard Brexit implementation, it appears that May’s government will be gaining further flexibility in the implementation of a softer Brexit.
Despite the view of UK government instability translated on the FX market since yesterday’s event, it appears that the reasoning might be excessive. Indeed, since his withdrawal from Brexit Secretary, David Davis made no mention of any intention to overthrow of the Conservative party. Furthermore, since supporters of a hard Brexit remain a minority in the parliament, moderates remain in majority, both in Conservative and Labour parties.
The fate of Brexit negotiations is now in the hands of EU leaders and specifically European Council President Donald Tusk. May’s Brexit white paper due on Thursday will be decisive, as a “cherry picking” behavior would certainly turn the dialogue into a much tougher tone from EU side.
Yesterday GBP/USD bearish trading session remains excessive. Closing at 1.3260 (-0.17%), we would suggest that a strong rebound is expected in the short-term. Currently trading along 1.3270, the pair is expected to reach 1.3350 highs.
By Vincent Mivelaz