The sterling jumped in overnight trading after Theresa May survived a coup from her party. Yesterday, pro-Brexit MPs against her leadership secured the required 48 votes to trigger a vote of no confidence against the prime minister. After passing all the procedures, conservatives voted on whether they wanted her to remain as the party leader or not. In the results reported at around 9PM, she emerged victorious with a large margin. 200 MPs voted in support and 117 voted against her.

While this was a good enough vote for the premier, it also exposed rifts within her party. It showed that the divisions could continue and possibly put the country in peril when the Brexit vote comes to parliament.

Today, she will travel to Brussels to convince the leaders there about the need for more negotiations. This is after the proposal she had negotiated with the EU leaders met resistance at home. Both the public and the legislators found the deal wanting to force her to postpone the vote.

This time however, the European Union will likely play hard ball. After the decision to postpone the vote, Donald Tusk welcomed the move and said that more negotiations could be made. The EU commission chair Jean-Claude Juncker and Germany’s Angela Merkel took opposing views. They said that there will be nothing to discuss about.

However, in a statement yesterday, the EU seemed to reduce the tensions. In a statement, Brussels said that, the ‘EU use its best endeavors to negotiate and conclude expeditiously a subsequent agreement that would replace the backstop.’ They also pledged to explore further assurances on the issue. Still, she comes to the negotiating table from a point of weakness following the divisions within her party.

In a Bloomberg opinion, Therese Raphael said that:

May will continue to seek concessions from the EU that might make her deal more palatable to MPs, but there are plenty in parliament who want to see her fail, either because they want no deal or because they want it to go to a second referendum or, as in the case of the opposition Labour Party, new elections. All her victory has proved is her deal has, possibly, 200 supporters – in a parliament of 650. There now comes a three-way fight.

Perhaps this was the reason why the sterling struggled to move past the 1.2660 level. In the chart below, while the GBP/USD pair rallied after the vote, it found strong resistance. This is because odds of her renegotiated deal being rejected are still high. Therefore, there is a likelihood that the pair will continue pushing downwards. The RSI has moved from more than 80 and has fallen to 50. Therefore, there are possibility that it will continue moving lower.

(Click on image to enlarge)