GBP/USD regroups from fresh bear cycle lows driven by the woes of Downing Street

At 1.1928, GBP/USD is under water slightly, bleeding by 0.11% at the time of writing after sliding from a high of 1.1989 to a low of 1.1875 on the day so far and in the aftermath of yesterday's resignations of members of the Conservative party.

 Health Minister Javid and Finance Minister Sunak resigned almost simultaneously out of dissatisfaction with UK PM, Boris Johnson's leadership. ''Replacements were immediately appointed in the persons of Barclay and Zahawi, but given the ongoing unrest, the question is how long they can enjoy their new office,'' analysts at Rabobank said. ''It could mean that the government will come up with popular measures, such as another tax cut, in an effort to regain the confidence of voters and party members.''

Sterling bears were hesitant to mark down the currency initially as the US dollar was drifting away from the fresh bull cycle highs made in the prior hours and earlier in the day. However, the currency fell to a fresh cycle low in London and again at the start of the New York session. Cable is now down nearly 12% against the dollar since the start of this year.

 Nomura said on Wednesday it now expects sterling will slide in the coming months to its lowest level against the US dollar since 1985."We remain short GBP/USD in spot and now target 1.15 by end-July, towards 1.10 by end-September. With the U. becoming a key energy export partner for Europe this is leading to significant terms of trade shock to the benefit of USD."  The analysts at Nomura also argue that the Bank of England also looked likely to disappoint investors betting on a 50-basis-point interest rate hike in August.

Casting minds back over the monetary policy path to date at The Old Lady, since December, the BoE has lifted the Bank Rate five times already. The market is pricing in 130bps of hikes over the next three meetings (August, September, and November), implying at least two meetings with 50bps hikes.

In other politics, an escalating row over Northern Ireland's status following Brexit could upend British trade ties with the European Union is also a weight on the currency.  ''Uncertainties regarding red tape associated with Brexit and fear of a trade war with the EU over the Northern Ireland protocol are likely to be clouding the investment outlook,'' analysts at Rabobank said.