Well, you knew this was going to be something dramatic right from the start. Just check out the buildup:
U.K. PM Theresa May Making Statement at 11:15am Local Time: BBC
GBP/USD REVERSES GAIN, DROPS BELOW $1.2550 BEFORE MAY STATEMENT
U.K. 10-YR GILT YIELDS EXTEND DROP TO 3BPS BEFORE MAY STATEMENT
U.K. 10-YEAR YIELD DROPS BELOW 1%; FIRST TIME SINCE OCTOBER
So that was at roughly 5:00 a.m. EST. And then, an hour later:
MAY COULD ANNOUNCE GENERAL ELECTION FOR JUNE 8TH: BBC
MAY SAYS SHE PLANS TO SEEK EARLY U.K. ELECTION ON JUNE 8
As you can see, cable and gilts were whipsawed:
“Our opponents believe that because the government’s majority is so small, our resolve will weaken,” May said in Downing Street in London on Tuesday after holding cabinet meeting. “They are wrong [but] if we do not hold a general election now, their political game-playing will continue.”
And in case there was any confusion: “We need a general election and we need one now.”
Well, ok then. The FTSE promptly dropped to its lowest since February 24.
Here’s Bloomberg with some useful color:
Theresa May should be having a miserable weekend after a catalog of blunders and political ambushes gave her the worst week she’s had since replacing David Cameron as U.K. prime minister eight months ago.
In the space of five days, May faced a new demand for Scotland to hold a referendum on quitting the U.K.; a record fine on her Conservative Party from the election regulator; a key tax policy falling apart; and claims from the White House that Britain helped spy on President Donald Trump before his election.
To cap the week, former Chancellor of the Exchequer George Osborne — who May fired when she took over — announced on Friday he was becoming a newspaper editor and would be fearless in holding power to account. Osborne is seen as a critic of May’s approach to Brexit, and his appointment to lead London’s Evening Standard stunned May’s aides and angered her allies.
In normal times, such a cocktail of political pain would constitute a crisis. Yet May’s Conservative team are privately relaxed because there is no prospect of a threat to her rule from the main opposition Labour Party. This means May’s drive towards a hard, clean Brexit remains largely unchallenged.
“This should be her week from hell,” said Philip Cowley, professor of politics at Queen Mary University of London. “It should be really bad but the most striking thing is, it isn’t really bad. She will have a glass of wine on a Friday night and go to bed perfectly relaxed because there is simply no effective opposition.’’
Ok, so that last sentence is certainly quite British, no? And a bit more:
An election isn’t due until 2020 though her popularity — polls show her Conservative Party is more than 20 points ahead of the main opposition — give her an opening to consolidate her power.The announcement indicates that May has decided she cannot get the Brexit legislation she needs through the House of Commons with the slim majority she inherited from David Cameron.
“There should be unity here in Westminster but instead there is division,” she said in a statement outside her Downing Street residence on Tuesday. “The country is coming together but Westminster is not.” A rift in Parliament will damage the government’s ability to make a success of Brexit, she said.
“I welcome the prime minister’s decision to give the British people the chance to vote for a government that will put the interests of the majority first,’’ Labour Party leader Jeremy Corbyn said on Tuesday in an emailed statement. “Labour will be offering the country an effective alternative to a government that has failed to rebuild the economy, delivered falling living standards and damaging cuts to our schools and NHS.”
In his response to Mrs May’s announcement, Lib Dem leader Tim Farron tweeted: “This is your chance to change the direction of your country. If you want to avoid a disastrous hard Brexit. If you want to keep Britain in the single market. If you want a Britain that is open, tolerant and united, this is your chance.
So you can add this to the list of geopolitical events you need to watch out for in the weeks and months ahead.
Ultimately, I suppose Philip Cowley’s assessment (excerpted above) still applies: “It should be really bad but the most striking thing is, it isn’t really bad. She will have a glass of wine on a Friday night and go to bed perfectly relaxed because there is simply no effective opposition.’’
