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A leadership challenge against Theresa May was successfully triggered earlier and Theresa May will be facing a no confidence vote later.

The pound tossed and turned when the leadership challenge was announced, but GBP bulls eventually won the day (for now), likely because of short-covering after two painful days for the pound and/or because British MPs quickly rallied around Theresa May, lowering the odds that she’ll get ousted from power.

As for the other currencies, the euro was also dragged higher and was the second top-performing currency of the session.

The Swissy, meanwhile, was the worst-performing currency of the session, likely because of the risk-friendly vibes in Europe (or SNB meddling).

The Kiwi is worth highlighting as well since it was the second worst-performing currency after the Swissy, which is kinda wonky given the risk-friendly environment.

  • Italian quarterly jobless rate: 10.2% vs. 10.3% expected, 10.7% previous
  • Euro Zone industrial production m/m: 0.2% as expected vs. -0.6% previous
  • Euro Zone industrial production y/y: 1.2% vs. 0.7% expected, 0.8% previous
  • U.S. CPI report coming up
  • No confidence vote against Theresa May later

Major Events/Reports:

The leadership challenge is on

Sir Graham Brady, Chair of the 1922 Committee, announced earlier during the session that:

“The threshold of 15 percent of the parliamentary party seeking a vote of confidence in the leader of the Conservative Party has been exceeded.”

“In accordance with the rules, a ballot will be held between 1800 and 2000 on Wednesday 12th December in committee room 14 of the House of Commons. The votes will be counted immediately afterwards and an announcement will be made a soon as possible in the evening.”

In other words, the 48 letters required to trigger a leadership challenge have been met.

Will Theresa May be ousted from power? I suppose we’ll know later.

And as Sir Graham Brady stated, the vote will take place between 6:00 pm GMT until 8:00 pm GMT, so we can expect the results of the vote sometime after that.

And according to BBC Political Editor Laura Kuenssberg:

Quite naturally, Theresa May stood defiant and said in a prepared statement that:

“I will contest that vote with everything I’ve got.”

She then tried to assure listeners that her Brexit deal can still work:

“I spent yesterday meeting Chancellor Merkel, Prime Minister Rutte, President Tusk and President Juncker to address the concerns that MPs have with the backstop – and we are making progress.”

“I was due to travel to Dublin this afternoon to continue that work – but will now remain here in London to make the case for my leadership with my parliamentary colleagues.”

Theresa May then warned that:

“A change of leadership in the Conservative party now will put our country’s future at risk and create uncertainty when we can least afford it.”

“A new Leader wouldn’t be in place by the 21st January legal deadline, so a leadership election risks handing control of the Brexit negotiations to opposition MPs in parliament.”

“The new Leader wouldn’t have time to renegotiate a withdrawal agreement and get the legislation through parliament by 29th March – so one of their first acts would have to be extending or rescinding Article 50, delaying – or even stopping – Brexit when people want us to get on with it.”

“And a leadership election would not change the fundamentals of the negotiation or the Parliamentary arithmetic.”

“Weeks spent tearing ourselves apart will only create more division, just as we should be standing together to serve our country.””

Anyhow, MPs began showing support for Theresa May. And according to BBC Political Editor Laura Kuenssberg:

And to give that number its proper context, Theresa May needs a majority vote (158 of 315 MPs) in order to survive the leadership challenge, so based on the public show of support, it looks like Theresa May won’t get ousted from power.

We’ll know soon enough…

Italy-related updates

Italy’s budget has been pushed to the background because of the leadership challenge against Theresa May. Still, it’s worth giving y’all some updates.

And first and foremost is that today’s scheduled meeting between Italian PM Giuseppe Conte and European Commission President Jean-Claude Juncker will continue as planned, according to an unnamed sourced cited in a Reuters report.

A separate Reuters report then cited another unnamed “source in the prime minister’s office” as saying that “Italy’s government has taken a decision on the budget, there is a proposal,” adding that Conte will meet Juncker “with good motivation.” No details on whether or not Italy adjusted its deficit target, however.

Other than those, European Economic Commissioner Pierre Moscovici was speaking earlier and he gave a more conciliatory (or less combative at least) tone when he said that he doesn’t advocate imposing sanctions on Italy to force Italy to comply with the E.U.’s fiscal rules.

Another risk-friendly day in Europe

Europe enjoyed another bout of risk sentiment during today’s morning London session, sending almost all of the major European equity indices higher for another day.

And market analysts say that today’s bout of risk-taking was due to easing trade-related concerns amid growing hopes for an end to the trade war.

  • The pan-European FTSEurofirst 300 was up by 1.03% to 1,372.79
  • Germany’s DAX was up by 0.89% to 10,876.10
  • The blue-chip Euro Stoxx 50 was up by 1.24% to 3,093.15

Major Market Mover(s):

GBP

The pound tossed and turned at the start of the session when the leadership challenge against Theresa May was announced.

However, bulls eventually won out, so much so that the pound easily dominated its peers.

And the buying pressure on the pound may have been due to short-covering after two consecutive days of broad-based weakness for the pound and/or because buyers were buying up the pound on hopes that Theresa May will survive the leadership challenge.

After all, lots of MPs quickly expressed their public support for May, lowering the odds that she’ll get booted out of office.

GBP/USD was up by 84 pips (+0.67%) to 1.2586, GBP/CHF was up by 101 pips (+0.83%) to 1.2523, GBP/NZD was up by 153 pips (+0.82%) to 1.8384

CHF

The Swissy had a rough time during the session. And while it’s probable that the Swissy may have been weakened because of dampened safe-have demand due to the risk-friendly vibes in the European equities markets, it’s kinda odd that the Swissy didn’t put up more of a fight, given the risks from Conte and Juncker’s meeting on Italy’s budget and the no confidence vote against Theresa May. Perhaps the SNB was weakening the Swissy?

USD/CHF was up by 18 pips (+0.19%) to 0.9949, CAD/CHF was up by 17 pips (+0.24%) to 0.7443, EUR/CHF was up by 33 pips (+0.30%) to 1.1283

NZD

The major European equity indices came off their highs late into the session, but the Swissy encountered sellers on most pairs from the get-go, which is kinda weird since European equities had a strong start and kept attracting buyers.

It’s not really clear why the Kiwi weakened during the session, but it’s possible that the risks posed by Conte and Juncker’s meeting and the no confidence vote against Theresa May may have sapped demand for the Kiwi.

NZD/USD was down by 11 pips (-0.17%) to 0.6846, NZD/JPY was down by 13 pips (-0.18%) to 77.63, NZD/CAD was down by 20 pips (-0.22%) to 0.9152

Watch Out For:

  • 1:30 pm GMT: Headline (0.0% expected vs. 0.3% previous) and core (0.2% expected, same as previous) readings for U.S. CPI
  • 1:30 pm GMT: Canada’s capacity utilization rate (85.8% expected vs. 85.5% previous)
  • 3:30 pm GMT: U.S. crude oil inventories (-3.0M expected vs. -7.3M previous)
  • 6:00 pm GMT: No confidence vote against British PM Theresa May
  • 7:00 pm GMT: U.S. Federal budget balance (-$193.5B expected vs. -$100.5B previous)
  • 9:00 pm GMT: Result of no confidence vote will be announced 
  • 9:45 pm GMT: New Zealand’s FPI (-0.6% previous)