GBP/USD: Pound Sterling Bounces As Boris Johnson Resigns
NAGA | Jul 07, 2022 10:22AM ET
The UK Prime Minister has been under immense pressure over the past year for various reasons which are not explicitly related to his role as head of the UK government. It was announced today that Prime Minister Boris Johnson has decided to step down and confirmed he would support whoever the party chooses.
The first reaction from the GBP/USD was a slight decline following his resignation, but the price remains in the green despite that. Until the Prime Minister resigned, the price had been increasing in value mainly due to the decline witnessed in the US dollar across the market. However, even with today’s slight increase in price, the overall price condition remains within a downward trend . Traders are now likely to be looking for clarity and evaluating how the pound reacts.
The resignation may surprise some, but it is another political crisis that has been brewing for some time. Only a few weeks ago, after the Prime Minister received a vote of confidence, it was confirmed that Johnson would remain in office as Finance Minister Rishi Sunak, Health Minister Sajid Javid, and several others resigned.
Boris Johnson had initially said that he would not resign. Previously, he was accused of violating quarantine rules, which was why the Prime Minister was required to obtain a vote of confidence. However, the recently reviewed new allegations directed at former deputy Christopher Pincher relating to sexual harassment had led to new calls for Boris Johnson to resign.
Over the past six months, GBP/USD has seen significant declines, but this has not necessarily been related to the political crisis. The decline has mainly been triggered by poor economic performance in the UK and generally high demand for the US dollar due to its safe-haven status and the recent interest rate hikes.
Today, there will be several speeches scheduled for specific Federal Reserve officials such as James Bullard and Christopher Waller. Traders are still hoping to receive evidence of further monetary policy tightening by the regulator as no significant indication was provided last night during the latest meeting minutes. According to the minutes, the stance of the Federal Reserve will depend on inflation data.
In addition to the above, the market is also awaiting the release of the US unemployment claims which is predicted to have a medium-level effect on volatility. In addition to this, the market will also be awaiting the confirmation of June’s employment change and the latest unemployment rate.
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