It’s official. After weeks of speculation the chairman of the 1922 Committee, Sir Graham Brady, has announced that the threshold of 15% of the parliamentary party seeking a vote of confidence in the leader of the Conservative Party has been exceeded. A ballot will be held this evening between 6-8pm GMT. All 315 Conservative MPs will vote, with the PM requiring 158 votes to survive. Theresa May needs a convincing victory to keep the Government on track and look to deliver stability during these turbulent times. What outcome can we expect from this no-confidence vote? According to the markets and various bookmakers, there is an 83.3% chance the Prime Minister will survive the no-confidence motion. A convincing victory, as predicted, would mean attention would switch back to getting her EU withdrawal agreement through Parliament. A much closer call and it would be anyone’s guess. Would this dent the PM’s confidence enough for her to resign? If so, we’d be in the same situation as if she were to lose tonight’s vote. The Conservative Party would need to elect a new leader, a process that will take up valuable time and no doubt put any further Brexit negotiations on ice.

How will the market react to that? Further signs of chaos and instability will ensue with sterling and FTSE to feel the brunt of it. GBPUSD has been under pressure since the 7 December, falling as much as 2% to the lowest levels in 20 months. We are somewhat off the post-referendum lows of 1.1777, currently sitting around 1.25. Further downside pressure and we may reach 1.2414/1.2305 zone, an area which saw multiple areas of support and resistance throughout a six month period (October 2016 to April 2017). If the PM overcomes tonight and we start to hear more positive news surrounding the Brexit negotiations, then we may see this retrace the existing losses with longer-term targets of 1.32/33, where we have a 38.2% long-term fib and where prices have been capped since June. The low does not look solid enough currently for the fib levels to stay valid. All eyes are now on tonight's event and how the markets will react.

GBPUSD

Daily Pivot: 1.2535
Weekly Pivot: 1.2744

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