The pound rallied on the political certainty that the contest in the Conservative Party ended quickly and that Theresa May will replace David Cameron very soon. The rally was worth nearly 500 pips, from the lows of 1.2850 to 1.3336.
But now, as Cameron just tendered his official resignation in Buckingham Palace and May is about to get the keys to the Kingdom, we are back to reality. The pound is selling the fact.
Update: Theresa May is now officially confirmed as UK Prime Minister. This does not change the picture for the pound.
Update 2: Phillip Hammond, up to now foreign minister will replace Osborne as Chancellor of the Exchequer.
Cable is trading down at 1.3160, suffering a slow but persistent drop from higher levels. The next line of support is at 1.3120, followed by the round level of 1.30. The low of 1.2790 is still far. On the topside, 1.3336 is now key support.
The main reasons for the slide is the same reason for weakness earlier this week: the upcoming BOE meeting tomorrow. Mark Carney and his colleagues are expected to deliver some kind of stimulus tomorrow. This will then be followed by further action in August, when the Bank also releases its Quarterly Inflation Report.
The BOE has not changed interest rates since March 2009. Many expect a rate cut to 0.25%. Another option is adding more QE, perhaps at a scale of 50 billion pounds.
More: BoE to cut rates by 0.25%, more stimulus in August
Here is the GBP/USD chart
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