With the preliminaries over, the main event can now begin.
The British pound has suffered its biggest one-day fall in nearly a year Monday as markets digest the fall-out from Prime Minister David Cameron's decision to call a referendum on whether to leave the European Union on June 23.
Over the weekend, a number of high-ranking members of Cameron's ruling Conservative Party said they would campaign to leave the E.U., saying that the reform deal that Cameron and his counterparts had agreed to at a two-summit that ended Friday didn't go as far as they wanted. Cameron will campaign for the U.K. to stay in.
Nearly half of Conservative lawmakers have indicated they are willing to go against Cameron, raising the prospect of a bitter intra-party fight similar to the one that tore the party apart in the 1990s--a feud that let to 13 years out of power.
The rebels were strengthened on Sunday when the outgoing Mayor of London, Boris Johnson, added his name to seven senior cabinet ministers who have already said they will campaign to leave.
"It is time to seek a new relationship," Johnson wrote in a column for the Daily Telegraph. "We will hear a lot in the coming weeks about the risks of this option; the risk to the economy, the risk to the City of London, and so on; and though those risks cannot be entirely dismissed, I think they are likely to be exaggerated. We have heard this kind of thing before, about the decision to opt out of the euro, and the very opposite turned out to be the case."
Johnson has been widely tipped in the past to succeed Cameron as Tory leader, although his star appeared to be on the wane in recent months as the glow from the 2012 London Olympics fades in the popular memory. A vote to leave the E.U. would badly diminish Cameron's standing as Prime Minister, and would put Johnson, as the most senior Tory so far to rebel against him, in a strong position to take over from him.
Cameron still has the backing of most of U.K. industry, which is afraid of losing its unfettered access to the E.U.'s single market of over 400 million people. TheCityUK, which lobbies on behalf of London's financial services industry, is also supporting Cameron's position.
"Our evidence has clearly shown that membership of a reformed E.U. and continued access to the Single Market is vital for U.K. competitiveness. It is also the preferred outcome for the majority of our members," CEO Chris Cummings said in a statement reacting to the summit deal.
However, Euroskepticism is the British symptom of the wave of discontent with establishment politics sweeping the rich world at present. Cameron, like all leaders who call referendums, has risked making Britain's future in the E.U. a vote on his own popularity, and on the wisdom of unleashing a civil war in his own party while it's still burdened with the responsibilities of governing.
By 0630 ET, the pound was down nearly 2% against the dollar at $1.4120. It was also down by 1.2% against the euro at €1.2781, flirting with a new 13-month low.