Pound Erases Tuesday Losses On Report May Has Support To Prevail In 'No Confidence' Vote

Update 3: This is big.

In what might be the first sign that May is growing weary of the unceasing Brexit chaos that has marred her tenure as prime minister, No. 10 Downing Street just hinted in comments that May might not be the conservative leader during the next election.

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Update 2: Cable has climbed to session highs, wiping out yesterday's losses, following a BBC report that 158 MPs - enough for May to prevail in the no confidence vote - have publicly promised to back the prime minister.

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Still, some MPs have cautioned that the vote could be closer than many believe.

Members of the ERG, who orchestrated the vote, has warned that a general election could be triggered in January because her deal simply doesn't have the support to pass and there's "no other way out". Others have said that, if May prevails, now might be the time to pivot to a softer Brexit.

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Update: As the rally in the pound would suggest, traders expect May will prevail in Wednesday's no confidence vote. Online betting markets are pricing in an 80% chance that she keeps her post as prime minister.

However, the stakes for markets are high should Tories deliver an upset defeat. According to analysts at Nomura, the pound could lose another 3% on a trade-weighted basis if May loses.

At the last count, 153 Tory MPs have publicly declared their support for May -  just short of the 158 she needs to win. Though, there's no guarantee that MPs adhere to their public positions during the vote. In other Brexit news, members of May's cabinet are warning that her Brexit plan faces almost certain defeat in Parliament if the Irish backstop provision isn't removed. EU officials, meanwhile, have insisted that the agreement can't be changed.

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Considering that Theresa May has managed to infuriate both leavers and remainers with her supremely unpopular Brexit withdrawal agreement, it's almost surprising that it took rebellious Tory MPs as long as it did to collect enough letters of no confidence in May to call for a no confidence vote, threatening to bring down the prime minister and sow chaos in the already tumultuous Brexit trainwreck.

Surprisingly, after two days of sharp losses that saw it break below the crucial $1.25 level, cable turned higher in early trade Wednesday as traders bet that May - who still commands widespread loyalty within her caucus - would win the vote with a strong majority. The pound climbed 0.4% to $1.2540 after seesawing in earlier trade (despite analysts at Deutsche Bank raising the odds that May's government could collapse).

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After a steady stream of conflicting reports, British media reported early Wednesday that the Tories 1922 Committee had collected the 48 letters of no confidence needed to call a no confidence vote in May - the threshold was breached after a handful of bitter remainers joined with their European Research Group colleagues.

If May wins the vote, she will be immune to further intraparty challenges for at least a year, though the opposition in Parliament could still call for a vote of no confidence in the government, which, if successful, would make another general election likely.

Jacob Rees-Mogg and Steve Baker, two leaders of the ERG faction of Brexiteers, published an open letter warning that May's plan would "bring down the government" if she is allowed to continue as prime minister, according to Bloomberg.

"Theresa May’s plan would bring down the government if carried forward. But our Party will rightly not tolerate it. Conservatives must now answer whether they wish to draw ever closer to an election under Mrs May’s leadership. In the national interest, she must go."

If May doesn't win 158 votes, a majority of Tory MPs, she will be forced to resign and a Tory leadership contest would follow, which, as the FT pointed out, would "plunge the Brexit process into chaos." But even if May wins, her government could find itself seriously hobbled - unless she wins by a sizable majority - by the perception that she no longer has control over her own MPs (of course, this sad reality has been abundantly clear for some time).

The prime minister has vowed to fight for her job "with everything I've got."

According to polling data collected by Statista, there is at least one prominent Tory figure who enjoys an approval rating equal to May's - and that's former London Mayor (and Foreign Secretary) Boris Johnson, who refused to rule out the possibility of challenging May's leadership during an interview over the weekend. However, as May warned, any successor likely wouldn't take over until January, meaning that Article 50 would almost certainly need to be suspended.

Infographic: The most popular political figures in the UK | Statista You will find more infographics at Statista

May, who is still making the rounds on the Continent as she pushes for alterations to her 'finalized' Brexit deal, has vowed to contest the vote which is expected to take place around 1 pm ET (6 pm London Time).

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