The market is giving a huge endorsement to Theresa May
If I had to rank major political leaders, the top two would be easy.
The ranking is purely based on the ability to win, hold onto power and execute an agendas.
First is Angela Merkel, beyond any doubt. She's loathed in Europe but she has been Chancellor for 11 years, navigated the crisis, boosted German employment and is probably going to win the next election.
Second is Abe. Merkel benefits from notoriously stable Chancellorships -- there have only been 8 since WWII. It's the opposite in Japan where leadership has changed hands 34 times since the war. In a couple months, he will be the longest-serving Prime Minister in 60 years. Abenomics hasn't been a miracle but the IMF did just raise Japan's growth forecast and he did a masterful job of cozying up to Trump.
That brings us to Theresa May, who has only been on the job for 9 months but could easily be considered #3 already. She was throw into a mess created by David Cameron and a divided party. It only took her days to devastate the Conservative leadership race. She followed that by outlining a consistent and coherent Article 50 plan that she executed.
The market wobbled on the election rumours at first but it's now clear that it's a brilliant strategy. With Article 50 out of the way, it's no longer a Brexit referendum. On top of that, she's popular, the opposition is in shambles and she can frame the election as a vote to give her a strong mandate to get a good deal from the EU.
So it only took the market minutes to assume she's going to win. Now the pound is pricing in the assumption that her stronger mandate will give her a better mandate to negotiate without the threat of an election.
The pound is pricing in the possibility (likelihood?) that not only will she win the election, but she will also win Brexit negotiations.
Unfortunately, she will run into the #1 name on the list when the real negotiations start. That will be a heavyweight title fight for the ages.
h/t @WFNatalieCiv
