Home Daily Commentaries Johnson becomes PM – Set to unveil cabinet

Johnson becomes PM – Set to unveil cabinet

Daily Currency Update

GBP - British PoundBoris Johnson was elected Tory leader as expected yesterday therefore becoming the UK's third Prime Minister in three years. In a poll of Conservative Party members Johnson took around 64% of the vote compared to rival Jeremy Hunt's 34%, therefore comfortably defeating the Foreign Secretary and meeting both the markets and bookmakers expectations of a relatively easy win. With Johnson 1/100 the day before the announcement the result was fully priced into GBP/USD aside from a small dip before and a small rally after members of the 1922 committee unveiled Johnson had the top job. What pound traders were really looking for were clues on the upcoming Brexit path that hadn't been revealed before in his winners speech, however nothing new was forthcoming and cable settled back to the 1.2450 handle where it currently remains. Theresa May is due to host her last Prime Minister's Questions at midday before heading to Buckingham Palace to tend her resignation. Shortly after Boris Johnson is expected before the Queen to offer to form a government, the first members of which we expect to be announced late this afternoon. Comments from the new PM for the rest of this week will likely be the main driver for the pound ahead of the summer parliamentary recess which starts on Friday. GBP/EUR is up to 1.1170 on euro weakness this morning.

Key Movers

The euro has started the day on the back foot ahead of a possible interest rate cut tomorrow from the European Central Bank. The monthly health check of the Eurozone has not painted a pretty picture this morning with both the French services and manufacturing PMIs missing target and the closely watched German manufacturing PMI dropping to its lowest level in seven years. Phil Smith Principal Economist at IHS Markit which puts the survey together stated: "The health of German manufacturing went from bad to worse in July, according to the flash PMI data, raising the risk of the euro area’s largest member state entering a mild technical recession." Although market expectations are for the ECB to hold rates tomorrow it now seems almost certain they will signal an easing of monetary policy conditions at their September meeting and the euro is tanking as a result. EUR/USD is heading towards the 1.11 handle with GBP pushing up towards 1.12. The chances of an economic contraction in the world's fourth largest economy has seen markets shun risk this morning with European equity markets in the red, gold higher and the USD/JPY slipping back to the 108 handle. There could be more bad news on Friday if the first estimate of second quarter growth from the US falls short of its annualised 1.8% for

Expected Ranges

  • GBP/USD: 1.2380 - 1.25 ▲
  • GBP/EUR: 1.1090 - 1.1210 ▲
  • GBP/AUD: 1.7780 - 1.7920 ▲
  • GBP/NZD: 1.8510 - 1.8690 ▲
  • GBP/CAD: 1.6280 - 1.6420 ▼