GBP/USD reverses a knee-jerk fall to fresh YTD lows, spikes to mid-1.2500s

   •  News that UK leadership challenge has been triggered prompted some aggressive selling.
   •  Possible delay in Article 50 might prevent Brexit supporters to back the no-confidence vote.

The GBP/USD pair reversed a knee-jerk fall to fresh 20-m0nth lows and rallied around 75-pips to fresh session tops, around mid-1.2500s in the last hour. 

The pair's sudden fall during the early European trading session followed the news that leadership contest against the UK PM Theresa May has been triggered as the needed threshold of 15% has been exceeded.

The pair dropped to an intraday low level of 1.2477 but quickly changed course as after the UK Justice Minister Gauke said that a delay in Article 50 would be needed if Theresa May loses the confidence vote. 

With several ministers coming out to pledge their support for May, Gauke's comments were seen as preventing Brexit supporters from backing the no-confidence vote, reportedly to be held at 1800 to 2000 GMT today.

Even if May is forced out, Parliament will take control of Brexit and expectations of a softer exit turned out to be one of the key factors prompting some aggressive short-covering bounce. 

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