Initial thoughts on GBP following David Davis' resignation
We've been saying that what matters for GBP markets is the type of Brexit delivered - not who delivers. The pound is able to live with ministerial resignations as long as that is the extent of the fallout. Looking at the tail risks of a Tory leadership contest - or even a General Election - we note the legislative hurdle is pretty high to see either outcome. So at this stage, one is inclined to interpret Davis' resignation as a sign that the UK government is steering towards a softer Brexit - which is the more powerful, positive GBP driver. But one should be wary that the next few days could be quite noisy in terms of the UK political landscape, so it's all about waiting on the sidelines and pouncing for the right opportunity to go long GBP.
For more of our GBP scenario analysis, please see our note GBP: Theresa May's Impossible Brexit Trinity.