Bye Bye May – UK PM will step down on June 7

Prime Minister Theresa May said on Friday she would step down on June 7, succumbing to calls in her governing Conservative Party to make way for a new leader to try to break an impasse over Britain’s departure from the European Union.

“It is now clear to me that it is in the best interests of the country for a new prime minister to lead that effort. So I am today announcing that I will resign as leader of the Conservative and Unionist Party on Friday the 7th of June,” May said.

Sterling’s record losing streak combined with the growing risks that Brexit will see a hard exit, is making fund managers abandon long-term ‘bullish’ bets. Just a few months ago, the base case was that Brexit would be delivered by PM May and that it would be a soft exit.

However, if we do see Boris Johnson, the current oddsmaker favorite, become Theresa May’s successor, we could see the ‘hardest’ Brexit occur. The pound (£1.2645), which is currently atop of its four-month lows, could see further pressure to target the psychological £1.2000 level and eventually the 2016 lows. A no-deal Brexit and a general election risks are likely to keep the pound under pressure.

But a weaker than expected showing for the Brexit party in the EU elections could potentially provide some relief for sterling, particularly if the Liberal Democrats perform strongly. A new Tory leader that is less of a Brexiteer than the likes of Boris Johnson could also see a modest bounce in the pair.

Support for Nigel Farage’s “no-deal” supporting party is at +37%, according to a recent survey, compared to +19% for the pro-remain Liberal Democrats and just +7% for PM May’s Conservatives.

What’s next?

PM Theresa May said she had agreed with Sir Graham Brady, chairman of the 1922 Committee of Conservative backbenchers, that the process for selecting a new leader should begin the week after 7 June.

  • Graham Brady will now consults the Conservative party’s board to establish the timetable
  • Potential candidates will now ask two Tory MP colleagues to nominate them
  • Conservative lawmakers will then vote in a series of secret ballots to knock out the least popular candidates
  • Within 10 to 14 days, a shortlist of two emerges
  • Hustings or speeches by the final pair will take place in major cities
  • The Conservative Party’s estimated 124,000 members nationwide will mail in their choice over the following month
  • After a process that typically lasts six weeks, the new leader is announced, most likely by the end of July
  • PM May is expected to remain as PM throughout, unless a caretaker leader steps in
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    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell