Pound's Fragile Peace Rests on May Keeping Hold of Brexit Reins
(Bloomberg) -- A leadership coup against U.K. Prime Minister Theresa May will topple the pound, according to Nomura International Plc.
Sterling would fall as much as 3 percent on the day if she is forced to quit, said Nomura analyst Jordan Rochester. May has already faced down one official challenge and constant rumors of plots to get rid of her but she will now face pressure to quit by June 30 or be ousted, according to the Sunday Times.
Sterling’s fortunes have fluctuated along with May’s and the chances of a chaotic no-deal exit from the European Union in recent months, with sentiment improving since a delay to Brexit was secured earlier this month. A leadership battle before Brexit is resolved would shock a market where volatility has fallen to the lowest in years and hedge funds now have the biggest long position on the currency since June.
“If Theresa May goes, the market focuses on how extreme her replacement will be,” said Rochester, referring to contenders with more hardline pro-Brexit views. “The odds of no-deal or an election shoot up.”
May has already promised to step down once a Brexit deal is secured but her position appears to be growing increasingly vulnerable. She faces criticism from her Conservatives over the handling of the Brexit talks as well as her decision to start discussions with the opposition Labour party.
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