British Prime Minister Theresa May said Friday she is to leave her post after she has failed to secure a consensus on a Brexit strategy with members of the U.K. Parliament.
Ms. May announced Friday she will remain in the role as "caretaker" until June 7 when she formally resigns as the leader of the U.K.'s Conservative and Unionist Party, and beyond, until a new Conservative Party leader is elected starting the following week.
Ms. May said she has done everything to convince members of Parliament three times to back her deal. "It is in the best interest of the country for a new prime minister to lead the effort," she said. "It will remain a matter of deep regret to me that I have not been able to deliver Brexit," she added.
The U.K. has until Oct. 31 to clarify its position on how it intends to leave the European Union by either accepting a withdrawal agreement that has been negotiated between Ms. May and EU leaders or deciding to leave without the deal.
Members of Parliament rejected both options and could not find a majority to accept proposals to hold a second referendum or remain in the single market through an alternative arrangement.
The pound sterling rose 0.08% vs. the dollar following the announcement Friday, to $1.26. The FTSE All-Share gained 0.74%.
"(Ms.) May's resignation came as no surprise, but the modest support sterling and U.K. rates have enjoyed since her announcement is somewhat remarkable," said Tim Graf, head of macro strategy for Europe, the Middle East and Africa at State Street Global Markets, in an email. He added that he expects that support is only temporary.
Seema Shah, senior global investment strategist at Principal Global Investors said that while sterling prices currently reflect the "repricing of Brexit Risk" in anticipation of Ms. May's departure. "Are we pricing in a no deal Brexit at these levels? No, the market is simply indicating that the risks of a no deal Brexit have increased," she said in an email. "Were that nightmare scenario to unfold, sterling closer to parity against the dollar should be expected."
Money managers said that no deal Brexit likelihood increased slightly Friday as Ms. May's successor could come from a hard Brexit camp. Among candidates is Boris Johnson, former major of London.
Regardless of who replaces Ms. May, the U.K. government "has a long hard road ahead of it to restore its reputation with the majority of voters and the country clearly needs leadership that heals its divisions," said Saker Nusseibeh, CEO of Hermes Investment Management.