Pound Strengthens As Theresa May Survives Confidence Vote

Pound Strengthens As Theresa May Survives Confidence Vote
December 13, 2018

 

The pound made a bullish reversal against its peers yesterday after media reports indicated that Theresa May is set to win the leadership challenge announced by the chairman of the influential 1922 Committee. The release of the latest US CPI data, which was in accordance with economists’ expectations, also had a positive effect on the cable.

 

Theresa May wins confidence motion, boosting the pound

A Sky News report earlier yesterday indicated that Theresa May had sufficient support from Conservative MPs to succeed a vote of confidence in her leadership. In particular, a total of 170 Tory parliamentarians have openly stated that they will continue to support her as a leader. There was no assurance, however, as the ballot is confidential.

The party has 317 seats, which means that the prime minister needs to garner at least 159 votes to gain a majority. Some of the prominent MPs who have openly declared their support for May include Christopher Pincher, Roger Gale, Mike Freer, Chris Grayling, Jeremy Wright, Claire Perry, Karen Bradley, Maggie Throup, Stephen Kerr, Gareth Johnson and Environment Secretary and leading Brexiteer Michael Gove.

Before the vote began, Gove said “I am backing the Prime Minister 100% – and I urge every Conservative MP to do the same. She is battling hard for our country, and no one is better placed to ensure we deliver on the British people’s decision to leave the EU.”

Likewise, foreign Secretary Jeremy Hunt offered his total support to Mrs.May. He said: “I am backing Theresa May tonight. Being PM most difficult job imaginable right now and the last thing the country needs is a damaging and long leadership contest.”

Chancellor Philip Hammond said, “The Prime Minister has worked hard in the national interest since the day she took office and will have my full support in the vote tonight. Her deal means we leave the EU on time, while protecting our jobs and our businesses.”

The news propelled the GBPUSD pair to 1.2660, from 1.2470. The MPs voted between 6 pm and 8 pm yesterday, and the result was announced at about 9 pm.

As expected, the outcome of voting went in favor of Mrs. May. The Prime Minister won a vote of confidence in her leadership of the Conservative Party by 200 to 117. Speaking in Downing Street, she promised to bring the Brexit “people voted for,” but said she had paid attention to the concerns of MPs who voted against her.

Comments by the UK justice minister, David Gauke, that a new leader would have to delay the Brexit process if Theresa May was ousted also helped the PM to win the confidence motion.

In the US, the Bureau of Labor Statistics released unimpressive US CPI data. The sharp drop in the price of gasoline ensured that the US consumer prices were unchanged in November, compared to the previous month. November’s flat reading in the Consumer Price Index was the weakest in eight months. In October, the Consumer Price Index rose 0.3%. In the year ending November, the CPI increased 2.2%, representing the smallest gain since February, after rising 2.5% in October.

Despite the firmness of key consumer prices, the overall inflation outlook is mild in the midst of falling oil prices and signs of slowing economic growth both in the US and abroad.

In addition, US crude oil inventories fell below expectations for last week, the Energy Information Administration said yesterday in its weekly report. Data from the EIA indicated that crude oil stocks declined by 1.21 million barrels in the week to 7 December.

This compares with forecasts for a decline of 2.99 million barrels, following a drop of 7.32 million barrels in the earlier week, amounting to a second straight weekly decrease. In addition to the decline in the inventory of crude oil, the supply disruption in Libya has also increased the price of crude oil.

Global benchmark Brent crude gained 65 cents, or 1.1%, to trade at $60.85 a barrel on ICE Futures Europe. The crude oil rally and weak inflation outlook have turned the greenback weak.

Technically, the GBPUSD pair is forming an inverted head and shoulder pattern as shown in the image below. The next resistance is expected only at 1.2750 levels. Therefore, we are anticipating the current rally to continue.

gbp - technical analysis - 13th December 2018

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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