Here’s how the pound could react to the upcoming votes and the next PM

As we’re going to start seeing the contenders culled to leave a final two, here what the probable reactions in the pound will be.

First of all, the main runners from the 10 are;

  1. Johnson
  2. Hunt
  3. Gove
  4. Raab
  5. Javid

I’d say it’s going to come down to Boris and Hunt but mine’s just an outside view and if we’ve learnt anything from these clowns over the last 3 years, it’s that you can’t be sure of any outcome. So, consider it an educated guess. Gove, Raab and Javid could be the closest outsiders.

Just to try and cover all bases, I’ll give an assessment for all of them. The real marker for the market is their stances on Brexit, as that’s the most important issue facing the UK right now. In the market’s eyes it’s not tax, social welfare, health or any of the usual domestic political footballs.

  1. Boris – Pro-Brexit, anti-2nd ref, threatening to hold out on the divorce payment, ERG member. GBP negative on his Brexit stance alone but likely to bust a gut to rework the deal, and probably has the balls to do it too. He’s also Pro-UK financial services, so a likely favourite of the City. The GBP reaction might be 50/50, negative on his official Brexit stance but potentially positive on his overall attitude to trying to work out a changed deal.
  2. Hunt – Pro-Brexit but not a no-deal bull at all. Also wants to try for a better deal and wants to pur some ERG members in the negotiating team. On Brexit alone, he’s a GBP negative but maybe not as much as he’s not sounded a hardliner in recent comments.
  3. Gove – Been caned for his drug and would have been more of a favourite for that but, it’s not the public voting for him so he’s still in the running. Pro-Brexit, anti-2nd ref, no-deal backer. Another who would go back to renegotiate. Also wants to push for a Canada style agreement, and is willing to extend again if needed to get a deal done. That takes some of the sting away from his main Brexit view but he’s another GBP negative initially.
  4. Raab – Big pro-Brexit, no-deal and anti-2nd ref. Wants to use the Malthouse compromise to work a new backstop agreement. this was a plan put together by both leavers and remainers. Big backer of proroguing Parliament to get Brexit thorugh. He’s GBP negative on his stance but don’t rule out him getting a position in any negotiating team, and if the Malthouse compromise is backed by both Brexit sides in the party, it could pave the way for party unity and something more solid to take to the EU.
  5. Javid – A remainer who’s now a softer Brexiteer but says he would back a no-deal. Wants to go directly into negotiations with Ireland over the backstop. Wants a technical solution and has even offered to pay for it. Likely GBP neutral/small positive.
  6. Hancock – Another remainer but reckons he has his own renegotiaion plan. Wants to rule out no-deal and backed the no no-deal vote. In market terms, a relative unknown and that could be GBP negative irrespective of his Brexit stance.
  7. Harper – Remainer but backing Brexit. Pretty much the same views to Javid on Brexit and who he’d renegotiate with. GBP neutral/minor positive.
  8. Leadsom – Leaver. Wants to leave 31st Oct whatever the situation is and has a 3-step plan to do so. Wants to introduce legislation on various Brexit issues in advance but wants the agreement of the EU before doing so. She’s pushing for no-deal arrangements to be in place and is probably one of the only people to have gone this far on no-deal planning. GBP negative on her leave stance but seems more open to compromise, so we might see a more wishy/washy Brexit. That moves the GBP needle more to neutral.
  9. McVey – Leaver and bit of a firebrand. That alone is likely to make her a GBP negative. She’s not for proroguing Parliament but is for pushing through Brexit without its approval if needed.
  10. Stewart – Remainer, wants to rule out no-deal, solution to a 2nd ref is to offer citizen assemblies. All sounds clueless so GBP negative on that but maybe a positive on his remain stance.

Pretty much all the contenders will have to show willingness to get Brexit through because the Conservatives back Brexit. The issue is getting the type of Brexit they all want.

This is only meant to be a rough guide and things will no doubt change as the runners get ruled out. We should have a better idea after these votes today. We should get round one results sometime around 12.00 GMT.

Ryan Littlestone

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