Brexit Questions Wouldn't End With New Leader, Rabobank Says

(Bloomberg) -- U.K. Prime Minister Theresa May is struggling to fend off a push to remove her, but a change of leadership wouldn’t solve all the difficult Brexit questions, said Jane Foley, head of currency strategy at Rabobank.

“Even if she’s ousted, even if she is replaced by another Tory leader, the issues with respect to Brexit do not go away,” Foley said in an interview with Bloomberg Television on Friday. “We are still faced with, well what’s going to happen now?” she said.

May on Friday reshuffled her minister team and took personal charge of the divorce talks with the European Union. The moves came at the end of an extraordinary week in which seven members of her government resigned and a push to force her from power gained momentum.

“The news over the weekend could really be crucial, and whether or not she’s beginning to get a bit more support or whether or not it looks like she’s going to be ousted,” Foley said. “Investors know that if she doesn’t get support for that deal in Parliament, the risk of a hard Brexit becomes really quite large, and that is of course what sterling is waiting for.”

The pound gained 0.4% against the U.S. dollar on Friday, rebounding a bit from Thursday’s plunge. But sterling still suffered a loss for the week and volatility soared to a two-year high.

“You really do have to be brave to be involved in sterling now,” Foley said. “By Monday morning, we should have more” indications on the U.K. political situation, “and that should obviously give clues for sterling,” she said.

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