UK Prime Minister May faces fight for leadership in crucial Brexit showdown

The resignation of U.K. Foreign Secretary Boris Johnson on Monday afternoon has led to suggestions that the British government is on the brink of collapse.

Johnson stepped down after Prime Minister Theresa May outlined her government’s desire for a softer version of Brexit. He is the second cabinet minister to resign within 24 hours after the U.K.’s main Brexit negotiator, David Davis, quit late Sunday night.

A statement released by Downing Street confirmed Johnson’s departure and said a replacement would shortly be announced. Later, in a statement to parliament, May thanked the “work” of Davis and “passion” of Johnson while noting their differences in opinion with her over Brexit.

That gratitude may not last long with many seeing the resignation as a pre-cursor to a leadership challenge, which would bid to topple May and replace her with a more ardent supporter of Brexit.

The prime minister would have to conduct a leadership contest if at least 48 of her own lawmakers were to move against her. The process for that involves politicians sending letters calling for a vote of confidence to the powerful 1922 committee of backbenchers.

Once that threshold has been reached, the committee's chairman will announce the start of the contest and invite nominations.

In reaction to Johnson's resignation, the pound fell around 0.2 percent against the dollar to its lowest point of the day.

Thanos Vamvakidis, global head of G10 FX strategy at BofA Merrill Lynch Global Research, told CNBC vie email Monday that the longer-term direction of sterling needs more clarity.

"If May survives and is able to replace the hard Brexiteers with new ministers more open to soft Brexit, it will be good for sterling. However, if she is forced out, political uncertainty will increase and the sterling will suffer," he said.

Source: CNBC

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