All eyes on Boris, who will he pick as his Chancellor?

Philip McHugh July 24th 2019 - 2 minute read

The pound stood firm yesterday as the news that Boris Johnson had won the Conservative leadership election helped to clear some of the political uncertainty in Westminster.

Sterling remains stable so far this morning, with GBP/EUR flat at €1.1159, GBP/USD subdued at $1.2437 and GBP/CAD muted at C$1.6338. Both GBP/AUD and GBP/NZD are holding steady at AU$1.7816 and NZ$1.8569 respectively.

Coming up today, we have Boris Johnson’s first day in office and the publication of the Eurozone’s latest PMI figures..

What’s been happening?

After initially dropping at the start of the day, the pound closed out yesterday’s session on fairly steady footing following the announcement that Boris Johnson had been elected as the leader of the Conservative party.

This helped to ease the short-term uncertainty in UK politics and allowed Sterling to stabilise as speculation over who would replace Theresa May finally came to an end.

The euro was put on the back foot on Tuesday, with investors shying away from the single currency as they brace for what is expected to be a dovish tone from the European Central Bank (ECB) at its policy meeting this week.

Meanwhile, the US dollar accelerated yesterday as it was buoyed by the announcement of a bipartisan budget deal in Congress which raised the US debt ceiling and should prevent a US fiscal crisis until at least 2021.

What’s coming up?

Potentially the greatest source of volatility in currency markets today will be the official start of Johnson’s premiership.

GBP investors will be watching closely as Johnson appoints his cabinet later today, with the direction of the pound likely to be determined by whether he chooses to try and promote stability by retaining members of May’s cabinet or surrounds himself with fellow Brexiteers.

In focus for EUR investors this morning will be publication of the Eurozone’s latest PMI figures, which could cast the euro lower and put more pressure on the ECB to ease monetary policy if growth in the bloc’s private sector slowed in July as expected.

Finally, in the absence of any notable US economic data today, we may see movement in the US dollar driven by external influences, with a potential side in some of its peers possibly bolstering the appeal of the safe-haven ‘Greenback’.
 

Written by
Philip McHugh

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