Halister News

(Bloomberg) -- If U.K. bookmakers are correct the majority of Britons will vote to stay in the EU. Yet, any relief rally for the pound and equities could be brief. Prime Minister David Cameron and Chancellor George Osborne are leading a campaign which is splitting the Conservative party and will almost certainly trigger a leadership challenge.

• A party coup similar to one that ousted Margaret Thatcher could hit U.K. assets hard
• In the summer of 1990, when Thatcher’s leadership was under attack, U.K. stocks slid 14% from August until her resignation in November
• Sterling went through the same period little changed, but it was underpinned by 15% interest rates, compared to 0.5% today
• Looking at the long-term performance of the pound, when it dives, it dives deep; click here for a chart of GBP/USD going back to 1985 when it dropped to a record low of 1.0520
• Cameron has said he will not lead Tories into the next general election. But his prospects of making a graceful exit and passing the reins to an anointed successor are fading fast
• Before the EU vote was called, Osborne and Boris Johnson were the two leading candidates to succeed Cameron. But both men may have lost support with their tactics during this campaign and could both be victims of any Tory bloodletting
• Should British voters defy expectations and choose to leave the EU, it will be time to dig out those unused 1985 invitations to the sterling/dollar parity party.
• NOTE: Mark Cranfield is an FX strategist who writes for First Word. The observations he makes are his own and are not intended as investment advice.