I hope you all enjoyed your Bank Holiday! It seems politics is back at the wheel driving the markets following British PM Theresa May announcing her resignation in June. Investors saw this as a risk for Sterling (Due to uncertainty) so we saw a sell-off on the Pound bringing GBPEUR exchange rates down to the 1.13 area (A 3 month low).
Before we dive into what happens next in regards to the PM position- the European elections results have been the main thing on the agenda over the weekend. Nigel Farage’s Brexit Party picked up the most seats (28) for the UK, stating that he would like a No Deal Brexit back on the table for negotiations and that he would like to be active in these negotiations as well. However, although Farage picked up the most seats, it was the Remain parties that picked up the most actual votes- which makes strategy pretty unclear for the next PM. Both the Tories and Labour suffered a huge blow in this election as many other parties took advantage of the current political mess in the UK.
Now in regards to what will happen in the UK, once Theresa May resigns in two weeks, the race for a new Tory leader will begin, with the current two favourites being Boris Johnson and Andrea Leadsom- who are both pro-Brexit. I believe many will think that being Pro Brexit and being for a no deal Brexit will be the key to winning this race, and some form of alliance with Nigel Farage and the Brexit Party will be the way to do this.
Following the new leader being put in place, I expect that a snap election may be called to put the choice back to the public on who they would like to run the country, my main concern is that there is little confidence in the Conservatives and Labour, so many votes will go to other parties which will lead to another hung Parliament, which only prolongs Brexit.
The main concern for the Pound right now is that a No Deal Brexit may be back on the cards, and for that reason, investors are selling off, and I do not see it going back to the levels we saw 2 weeks ago anytime soon due to the impending risks moving forward.