The recent announcements by the UK Prime Minister, Boris Johnson, have seen the Sterling stagnate, despite a short-term rally into the end of the week. The PM released his formal resignation following a call by members of parliament to step down from Downing Street.
The no-confidence decision made by ministers has seen the Great British Pound fall back inside its weekly range. This resignation decision has marked the end of the Brexit-Pandemic era in UK politics and is an indication of civil unrest towards the Tory leader. His replacement is yet to be decided as investors look for a successor to calm the turbulent economic and political climate.
The list of contenders for the potential Conservative Party Leader includes; Rishi Sunak, Sajid Javid, Ben Wallace, Penny Mordaunt, Nadhim Zahawi, Liz Truss, and Tom Tugendhat.
Sterling has held its strength whilst the Euro weakened with continued Dollar strength. It seems that the range we are trading in of between 1.19-1.20 is showing no willingness to move in any given direction as the markets await future reports. For now, Johnson will remain in the leadership seat until the next-in-line has been confirmed in the foreseeable future.
This could be a short turnaround, with a replacement announced in the coming few weeks. Financial markets across the world will react to the successor with a substantial move in GBPUSD. A short-term price rise was seen after the release, but due to the ongoing political uncertainty, GBPUSD has fallen back down to the lows last seen at the start of the COVID-19 Pandemic announcements. The Sterling against the Dollar is trading just above the pandemic lows, the weakest pricing seen in the last two years of market activity.
On Wednesday 6th July 2022, the pound hit $1.1877, the lowest since March 2020.
We spoke with an Analyst from YLD FX for their thoughts on the recent announcements; “The markets have seen huge changes on a global scale in a short period of time. GBP has shown continued downside pressure, with recent political scepticism.”
“It seems that the announcements by Boris Johnson saw a short-term rally in the price of the pound into the week – with a return back inside this range. The uncertainty has seen the Sterling come to a short standstill as markets wait for further news. Whereas the Euro has continued to trade lower, GBP appears to have largely priced in the fundamental driving forces behind current UK political and economic conditions.”
The Analyst continued: “It is difficult for both retail and institutional investors at this time to predict where UK markets are headed next. The new leader may look to increase public spending as inflationary pressures continue to create recession fears. Whilst in office, soaring gas prices will have to be addressed in order to maintain economic stability.”
With YLD FX analysts stating the GBP is hard to predict is saying something, especially as 68.2% of their clients were profitable in May 2022. Get set for a few choppy months on Sterling until the markets settle down.
