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Market News Johnson retains the Prime Minister's throne! GBP traded above 1.25, three factors have a greater impact on the market outlook

Johnson retains the Prime Minister's throne! GBP traded above 1.25, three factors have a greater impact on the market outlook

British Prime Minister Boris Johnson wins a vote of no confidence, but his position remains challenged. The vote of no confidence had a big impact on the pound, and the pound held on to 1.25 after the results were released. Analysts pointed out that the market believes that replacing Johnson is unlikely to change the trajectory of the UK economy in a big way. Compared with the UK political situation, global market sentiment, UK domestic economic data and central bank policy outlook will still firmly occupy the dominant position affecting the trend of the pound.

2022-06-07
11879
Conservative MPs cast a vote of no confidence in Prime Minister Boris Johnson on June 6. The results of the vote showed that 211 of the 359 Conservative MPs supported Johnson; 148 wanted him to step down, missing the 180 votes needed to pass a motion of no confidence. Johnson will remain the leader of the Conservative Party and Prime Minister of the United Kingdom. Under current rules, Conservative MPs are not expected to hold another no-confidence vote for a year.



Johnson thanked his colleagues for their support, saying it now needs to be united in the name of the Conservative Party and can focus on helping the British people; this gives the UK an opportunity to continue strengthening the economy, and the government must help people make ends meet. In addition, British Prime Minister Johnson refused to rule out the possibility of an early election.

While Johnson's victory means he won't be challenged again for a year under current party rules, he's not necessarily out of the woods: his predecessor Theresa May survived a similar vote in 2018 , and with greater advantages, but resigned a few months later.

Alan Ruskin, chief international strategist at Deutsche Bank, said the vote was a signal that the current British leadership was less secure, raising the risk of cabinet resignations in the coming weeks. He believes Johnson's victory is unlikely to affect investors' long-term strategy for the pound.

Sterling is still strengthening after news that Johnson will face a vote of no confidence. Sterling held above 1.25 after Johnson won a vote of confidence.

Overall, the market reacted positively to news of the competition, with the pound rising to 1.2570 from 1.2500 at one point, said Samuel Tombs, an economist at Pantheon Macroeconomics. This appears to reflect a general principle that markets favour a Conservative government, and under a new leader, the Conservatives may have a better chance of winning the next election.

Shane ONeill, head of rates trading at Validus risk management firm, suggested that Johnson could stay on as prime minister for a while, which was safe for markets. In terms of factors affecting the future trend of the pound, he believes that the current political situation is secondary to inflation and the Bank of England's interest rate decision.

Market analyst Gary Howes said the reason for optimism about British politics in the foreign exchange market was understandable: Replacing Johnson is unlikely to change the trajectory of the U.K. economy in a big way. A stronger pound could also be a sign of broader problems at play, not least improved investor confidence reflected in a rally in global equities. For sterling, global market sentiment, UK domestic economic data and the outlook for central bank policy will remain firmly in control.

News on June 6 that money markets are betting that the Bank of England will raise interest rates by 50 basis points by December is undoubtedly a potential positive for the pound.



GBP/USD daily chart

At 9:44 GMT+8 on June 7, GBP/USD was at 1.2507/08.

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