No fundamental development can compare with the UK decision to leave the EU. It has set off a chain reaction whose outcome is still far from clear. Sterling is firm alongside most of the major and emerging market currencies today. Sterling narrowly edged above yesterday’s highs to reach almost $1.3425 before encountering selling pressure.Â
Equity fund managers may find themselves over hedged into quarter-end, may have to buy sterling today or tomorrow. This may provide an opportunity for those who want to re-establish short sterling hedges, reduce sterling exposure, or go outright short. The $1.3480-$1.3550 area may seem a bit far, but it is an interesting technical area. Â
UK Prime Minister Cameron attended what will likely be his last EU Summit dinner. Reports made it sound like he blamed the other officials for not making more concessions to the UK especially on free movement. There seemed to be little recognition on Cameron’s part that 1) calling a referendum was a mistake in the first place; 2) that such an important change maybe should not have been decided on a simple majority basis; and 3) that the Remain ran a poor campaign, based on fear, rather than a positive, constructive agenda. Â
The Tory Party leadership challenge formally opens today as candidates’ names are submitted. The Labour Party is hardly in better shape. Corbyn overwhelmingly lost a vote of confidence among the Labour MPs; This was a foregone conclusion. The poor showing in the local elections that were held in early-May, coupled with the feckless campaign to remain and the alienation of many of Labour’s traditional donors all are strikes against Corbyn. Â
Corbyn’s support is derived not from the part of Labour that was elected, but the rank and file members who are to the left of the MPs. Corbyn has refused to submit to the demand of the MPs. The next step is for the MPs to formally trigger a leadership contest.  It is not clear if there is a rival who can capture a majority of the rank and file. Â
