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It’s Not Just UK Politics Dragging the Pound Down

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UK’s Leadership Contest Officially Begins

Right now, there are whopping 10 lead candidates gunning for Theresa May’s title at Downing Street.

Nominations for the position took place on Monday, requiring support from 313 Tory MPs to proceed. The biggest party battle to choose the next Conservative Prime Minister took center stage last Friday when the UK PM officially resigned after giving in to political pressures over her Brexit failure.

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The nominated Tory MPs will go through the first vote on June 13th (first ballot). Then, the second vote will be on June 18th (second ballot,) with the 19th and 20th of June kept for further ballots if required.

Finally, from June 22nd onwards, the two remaining candidates will battle until the party’s 160,000 members decide who of the two is going to be eliminated on the July 22nd vote.

Borris Johnson Builds Up Support, Gove and Hunt Close

As it stands, 110 out of 313 MPs have yet to declare their support for Tory candidates. And only 5 make it beyond the first ballot threshold of 16 votes (the second ballot requires the support of 332 MPs).

Boris Johnson (57), Michael Gove (31), Jeremy Hunt (29), Dominic Raab (22) and Sajid Javid (18). Despite the 110-vote gap, the two candidates that seem to be running the two-finalist July race are Johnson and Hunt.

The former is running on an end of October “leave” and has 67% odds of winning the nomination. The latter, seen as the main challenger regardless of his “remain” support, is now warning of the risk of leaving without a deal. Hunt has recently won over Penny Mordaunt and Amber Rudd’s support too, but odds tracker report only a 7% chance of winning.

Corbyn Criticised at PLP Meeting After Election Performance

Political turmoil seems to be letting uncertainty grow once again not only over the ‘takeover’ platform but also amid party-politics.

Labour campaigners, and particularly the “Labour For A Public Vote” group, are planning to ambush Corbyn in an attempt to prevent a repetition of last year’s disappointment at the party’s annual “compositing” meeting.

The group now demands a change in the party’s position on Brexit, and that could end up in a rerun of the 2016 party-policy vote. Corbyn wants to avoid this as he now leans towards a general election rather than a second referendum option. However, his leadership is being challenged from all sides.

On Monday night, at the weekly Parliamentary Labour Party (PLP), Corbyn was criticized on his failure to end anti-semitism and for crashing in the party in the European elections.

UK GDP, Production and Construction ALL Down

Monday’s GDP growth weakened over the past three months from -0.1% to -0.4%. This was primarily on poor car production figures and ahead of the UK’s departure of the EU as production sites keep shutting down.

Manufacturing also fell in April, contracting to -3.9%, as a result of a decrease in orders due to UK’s departure extension. Construction declined as well in April on a month to month basis, owed to a big fall in repair and maintenance.

Pound Under Pressure Below $1.28

Uncertainty surrounding the UK’s leadership battle, party politics and now Monday’s poor economic data will most likely keep bears on track to reaching lower levels. Having corrected down to the 50% Fibonacci retracement ($1.2660), this could trigger another upside move to end the bullish impulse near $1.2850.

In the short-term both RSI and MACD support such a scenario as they have formed a bullish hidden divergence signal that could take prices above $1.2763. If wave 5 (v) competed by the aforementioned high though, we could be looking at a downslide sooner than expected, with a bullish invalidation at the $1.2560 level.

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