Pound Slides On Report Cabinet Has Turned On May Ahead Of Critical Votes

Ahead of what are expected to be a string of disastrous votes in Parliament this week, the British press is already ratcheting up the pressure on Prime Minister Theresa May, who has reportedly lost the support of all but two of her cabinet ministers.

May

The news sent the pound sliding, a portent of what's likely to be a rocky week for cable traders.

Pound

May is widely expected to lose a Tuesday vote on a slightly modified version of the withdrawal agreement she negotiated with the EU, which was voted down by a historic margin of 230 votes late last year. Assuming that vote fails, May is expected to call a vote on whether Parliament would support a 'no deal' Brexit (also expected to fail). Finally, MPs will have the opportunity to vote on whether they would support delaying Brexit by a few months.

If that vote passes, May will be forced to go to the EU27, hat in hand, and ask their permission for a delay at an upcoming summit. Critics say they worry doing so would essentially amount to May giving up any leverage she still had, only to wind up in the exact same place they are now (which is effectively where they have been since the EU signed off on the withdrawal agreement last year). May has already promised that she wouldn't lead her party in the next round of elections, and speculation has been mounting that she could be effectively ousted by her cabinet before the summit.

May

Courtesy of the Telegraph

Though, if all three votes fail, there's a chance that May could be out by the end of the week.

Meanwhile, the Bank of England is doing its part to make sure the British people and their banks don't lose sight of what a sh*tshow a 'no deal' exit could be. The FT reported Sunday that the BoE has told some UK banks to triple their holdings of easy-to-sell assets, enough to withstand a 'severe stress' under the UK's macroprudential guidelines. These banks were told they must have enough cash on hand to prepare for a scenario where the market for interbank credit freezes up for 100 days - up from the 30 under BoE rules adopted late last year - and to also prepare for the possibility that banks would be shut out of foreign exchange markets, leaving them unable to swap sterling for dollars, something that persisted for a few days during the financial crisis, according to the FT.

Though the BoE is expected to relent if a deal looks likely, this is what passes for "sensible prudential management" in the age of Brexit. Perhaps the central bank wants to ensure is call for "severe market volatility" becomes a self-fulfilling prophecy if kicking the can fails and the UK crashes out of the EU.