Pound Wakes As Theresa May Takes Over

In what’s either a sign of cunning or desperation, Theresa May revealed she will lead Brexit negotiations herself. The pound gained on the headline but the CAD and CHF remain the leaders in early US trade. So what to make of May pushing aside newly-installed Brexit negotiator Raab? He’s been relegated to preparing for a no-deal Brexit.

This is probably more about the internal squeeze than an external one. May has been in a constant battle with Brexit deputies while soft-and-hard Brexiteers push their agendas. David Davis seemingly used his platform to launch himself into the leadership conversation. For her, this cuts out the middle man, enabling her to negotiate the deal, which could define her.

By streamlining the process, May could reach a more timely agreement with the EU. Time is not on her side as she also must avoid possibilities of an internal rebellion and the risk of a confidence vote. If she stumbles, a collapse in her support isn’t necessarily a bad thing because it may lead to a softer Brexit, or even another referendum. That’s a GBP-positive.

Overnight, Aussie Q2 CPI rose from 1.9% y/y to 2.1% y/y but below expectations of 2.2% y/y. The RBA is seen sidelined for a long period, while the Aussie remains dragged across the board by the declining Chinese yuan and the impact of China’s delevraging.

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