The FTSE 100 stock market and the pound both rose this morning amid claims that traders now believe Brexit could be postponed or even cancelled.
The pound briefly dived upon news of a leadership vote, but then rose – with traders said to be cheered by the news it could mean the postponement of Article 50.
This graph shows the pound falling against the dollar after the announcement, before rising
The pound at 9am was $1.2530 compared to $1.2523 at the previous close, while the euro was £0.9035 compared to £0.9035 at the previous close.
In the eurozone, Frankfurt’s DAX 30 was up 0.5 per cent to 10,832.04 points and the Paris CAC 40 climbed 0.6 per cent to 4,834.24.
Connor Campbell, from Spreadex, said: ‘Though it avoided immediately spiralling, sterling was nevertheless under pressure on Wednesday as Sir Graham Brady announced that the 1922 Committee finally has the required number of letters to trigger a vote of no confidence in Theresa May.
‘The pound was already in a sorry state before all this, shedding its initial Tuesday rebound – and then some – after the Prime Minister was repeatedly rebuffed when trying to reopen negotiations with a sample of EU leaders, including an intransigent Angela Merkel.
‘Now the currency has the added headache of Wednesday evening’s no confidence vote, one that could still bring about the resignation of May even if she secures a majority, dependant on how close the final result actually is.
‘If she does win, however, and decides to remain in power, then there can’t be another vote for 12 months, lending a certain amount of (confidence and respect-eroded) stability to the PM.
‘It is perhaps this latter prospect that prevented the pound from tanking on Wednesday. In fact, after a brief dip lower it actually rose 0.1% against both the dollar and the euro, striving to lift off its recent 20 month and 15 week lows respectively.’
Neil Wilson, from Markets.com, added: ‘If May loses then we could have a leadership contest beginning in earnest. A tussle for the soul of the Tory party would begin and the spectacle will create further uncertainty for investors.
‘Huge instability will remain whatever the result of the confidence vote. The clocking is ticking on a no deal exit, although there is now a higher chance that we could see Article 50 delayed to allow the UK more time. More permutations than you can shake a stick at.
‘The pound plunged on the news, with GBPUSD dropping sharply before paring losses to trade just below 1.25. It’s now struggling to hold 1.2490 and certainly we could see further losses as the weight of this political uncertainty tells on trading.’