News of a no-confidence vote on Boris Johnson’s premiership boosted the pound yesterday morning. However, that has gone into reverse this morning as a potentially weakened prime minister may now limp on for over two more years.
The pound surged by almost a cent against USD and a little less against EUR on the news of a potential end to Johnson’s reign yesterday.
While this may at first seem counter-intuitive, as the currency markets tend to favour stable (and Conservative) government, it seems likely that the markets judge that (a) a new leader may rejuvenate the Conservative Party and increase the likelihood of victory at the next general election, and (b) a different leader may decrease the chance of discord with the EU over the Northern Ireland protocol and avoid a trade war.
In any case the Prime Minister won, but by potentially too small margin to see off future challenges. Hence GBP/USD is now weaker than where it started yesterday morning and GBP/EUR is not far off.
Other than that it was a quiet day for data, with the only release being a disappointing decline in new car sales year-on-year of 20.6%.
The markets will be keeping an eye out for any hints of a Johnson resignation, but as the pundits have noted, that seems unlikely.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Personal Trader on 020 7898 0541 to get started.
