The British pound is growing on Johnson’s failures
The likelihood of a tough Brexit is lowering as the Prime Minister B. Johnson lost the majority in the British Parliament, and the British pound is showing a steady growth. On Tuesday, the British pound updated the low of January 16, 2017 against the US dollar. After Prime Minister Boris Johnson demanded a support from parliamentarians in support of the tough Brexit, threatening in the end with early parliamentary elections. This kind of blackmail collapsed the British pound and caused a split in the ruling majority of the British Parliament.
As a result, British Prime Minister B. Johnson lost influence on the majority in parliament due to an attempt at unsuccessful manipulation. An early parliamentary elections in the UK were rejected in addition to the fact that Johnson does not have a majority. Against this background, the probability of Brexit without a deal has significantly decreased.
The Eurosceptics led by Johnson lost the ruling coalition together with the reduction of political risks. Because of what, the British Parliament was thinking about moving the Brexit date from October 31 to a later date, around January 31. This will allow parliamentarians to legitimize actually the Brexit deal and nullify the possibility of a tough Brexit.
Political risks increase, which could also lead to Brexit’s opportunity without a deal since B. Johnson is losing his popularity as the British Prime Minister. But in the meantime, B. Johnson is trying to regain control of the majority, relying on the Brexit date of October 31. And noticeably softens the rhetoric regarding the possibility of an exit without a deal.
Against the backdrop of the end of a three-year saga called Brexit, the British pound remains near a historical lows. Any hint of a deal is considered a positive signal for the pound. Not to mention the postponement of the Brexit date. But, despite the possibilities of a trade deal between the UK and the EU, they are limited to deals accepted under Prime Minister T. May.
GBP/USD chart – Japanese candlesticks. Blue line: the GBP/EUR pair is taken with the reverse EUR/GBP for more clarity.
The likelihood of a tough Brexit will strengthen the decline of the British pound across the market, down to parity with the euro and even the US dollar. To a lesser extent, political risks and the next change in the British Prime Minister will exert short-term pressure on the pound.
Anton Hanzenko