Theresa May to Resign. A Johnson – Farage – Brexit Collaboration?

Bob Mason
Updated

After just short of 3-years, Theresa May’s time as British Prime Minister is coming to an end.

Stepping forward to lead Britain out of the EU was an unenviable task and one that few were willing to take on.

David Cameron’s teary good-bye to British politics opened the door for Theresa May. Hopes of a Thatcher-style leadership faded into the haze as Brexit negotiations began. Negotiations delivered little for the Tories or Parliament to get behind. The EU’s hard stance on anything anti-Establishment was not unexpected and could eventually become a poignant moment in British political history.

The Day Ahead

With Thursday’s vote for EU MPs now over, there’s very little hope of a surprise victory.

Theresa May is expected to meet with the 1922 Committee first thing this morning and then announce her resignation at a Number 10 press conference.

Favorite to succeed Theresa May is Boris Johnson who resigned as foreign secretary last July.

As a pro-Brexiteer, the prospects of a no deal departure from the EU certainly rise, though as we have seen in recent months, it’s not just the Prime Minister’s view that counts. Parliament needs to be on board and a splintered Tory Party is unlikely to fall in line any time soon.

Rebel Tory MPs ultimately left Brexit negotiations in tatters. It was also the rebels that forced Britain into this week’s EU elections.

What Lies Ahead

As the dust settles from the EU Parliamentary election results and Theresa May steps aside, the market focus will return to Brexit.

There will be plenty of uncertainty over what lies ahead. For Boris Johnson, an alliance with the Brexit Party may make sense if Farage manages to gain influence in Brussels. Both leaders aligned, the pair may be able to garner the necessary support to get a deal through parliament. Swift action could deliver Brexit well ahead of the Halloween deadline.

While the Labour Party may look to force a General Election in a bid to deliver a 2nd Referendum, it will all boil down to how much support Theresa May’s successor can draw.

The Tories would certainly want to avoid a General Election. The local elections and what is likely to be a dire EU Parliamentary Election leaves the Tories on the back foot.

For the Pound

News of Theresa May’s imminent departure from Number 10 has had little impact in the early part of the day.

Following recent EU Election polls, few expected May to make it through the weekend.

Expectations of the return of Boris Johnson is also largely priced in. There will be uncertainty, however, over what lies ahead from a Brexit perspective.

With plenty of chatter expected in the days ahead, the Pound will be at the mercy of the news wires.

Will Boris Johnson and Nigel Farage rip off the Band-Aid and pull Britain out of the EU without a deal?

Whatever the decision, uncertainty should ultimately lead to some clarity and that can’t be a bad thing. Johnson and allies will need the Tory rebels to fall in line though. Otherwise, it could be more of the same in the months ahead.

At the time of writing, the Pound was up by 0.21% to $1.26839.

This article was originally posted on FX Empire

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