GBP/USD opened with a gap higher but surrendered those gains in Asian trading
The positive Cabinet meeting outcome from Friday saw sterling bulls make a last gasp push higher, and in early morning trades today there was a gap higher for GBP/USD above the 1.3300 level.
That's the first time the pair managed to get above the figure level in a little over two weeks, but as UK ministers started resigning earlier (one, two, and three) we saw cable surrender those early gains and fall under 1.3300 before trading near the figure level now as the dollar stays weak across the board.
So, what's next for cable from here?
As European traders come in, the largely expected move will be further downside in sterling as political uncertainty weighs. The fact that Davis is gone means May has managed to win out and likely strike a compromise with parliament and her ministers on getting a "soft hard Brexit". However, whether or not the people will be happy with it (surely not) is a separate issue.
And that will put May's authority and position into question, leading to further uncertainty. And that is not good as it will weigh on investment and business decisions - hence, that is a sterling negative over the next few weeks or even months.
The key deadline in all of this is trying to come up with a proposal feasible enough to be discussed with the EU by October. May has said they will publish the Brexit white paper later this month, so let's see if they can manage to propose anything substantial of note (highly unlikely still at this point but Davis' resignation may make it easier).
But as mentioned above, May's push to appease parliament and the EU is not going to be welcome by the hard Brexit camp and also by the people who voted in the referendum back in 2016. Given the situation, calls for a second referendum won't be too far down the road but we'll get there when we get there.
For now, it's all about the uncertainty at play and that's not going to help sterling in the near-term - especially when key data only arrives next week so there's not much else to give it any reprieve.
But hey, maybe England winning the World Cup can give it a bit of a boost in the meantime. :D
