CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What are the implications for sterling from Prime Minister Johnson?

Boris Johnson has been announced as the new leader of the Conservative Party. With around 66% of the votes of Conservative members, Johnson defeated run-off rival Jeremy Hunt. By extension, today he has taken over from Theresa May as the next UK Prime Minister. Where does this leave the state of Brexit and the outlook for sterling?

Boris Johnson leave

For weeks now, financial markets have been worried about the prospect of a more euro-sceptic Prime Minister taking over from Theresa May. Boris Johnson has been a clear front runner throughout the campaign to be the next Conservative leader/UK Prime Minister. Sterling has been under pressure throughout the past few weeks, losing over 5% of its value against both the US dollar and the euro. What do we need to consider for Boris Johnson’s next moves?

There are a few things that need to be considered:

  • How does Boris deal with Brexit?
  • Will Labour leader Jeremy Corbyn call a vote of confidence?
  • How will the Bank of England respond?

 

The prospects for Brexit  

Johnson can be seen as all bluff and bluster. He has seemingly preferred to spend the last few weeks of the leadership campaign confounding people with his mastery of linguistics, rather than giving straight answers to straight questions. However, he has threatened to keep the prospect of leaving the EU with no deal on the table. On the campaign trail Boris said that the UK would leave the EU on 31st October “do or die”. Whilst being a viable tactic of negotiation, the prospect of the UK leaving the EU on the 31st October without a deal is a significant concern for financial markets. Traders have had to price in the increased probability of a disorderly Brexit into sterling (hence the 5% decline).

So, is a hard Brexit set to happen?

Well, Boris has just under 100 days to get a deal and prevent leaving the EU with no deal. To prevent a hard Brexit, he will have to work fast to cobble together some sort of deal from the EU. Perhaps a realistic threat of “no deal” will be a slap in the face that brings the EU around. However, unless Johnson accepts much of what Theresa May negotiated, a substantially different deal appears to be a pipe-dream.