Home Daily Commentaries Johnson and Hunt in contest for next PM

Johnson and Hunt in contest for next PM

Daily Currency Update

GBP - British PoundThe final vote of Conservative MPs to find a new leader ended yesterday with Sajid Javid and then Michael Gove being knocked out of the contest leaving Boris Johnson and Jeremy Hunt as the last two candidates. The vote will now be put to Conservative Party members across the country in a postal ballot with the result due in late July. Bookies currently have Johnson as an almost dead cert to land the job at 1/16 with Hunt the rank outsider at around 8/1. Johnson has large support amongst the 160k Conservative Party members so it looks like the colourful and sometimes controversial BoJo will be confirmed as PM in around one months time. Johnson has promised to lead the UK out of the EU with or without a deal on Halloween so expect the pound to remain pressured for the foreseeable future. GBP/USD continues to hover around the 1.27 handle around two cents higher than the start of the week however this is more to do with dollar weakness than anything else. Away from politics yesterday saw the latest interest rate decision from the Bank of England with rates held at 0.75% as expected. Sterling slipped a little on its release however as second quarter growth estimates were downgraded from 0.2% to 0% as Brexit uncertainty sees the UK economy tread water. Retail Sales numbers were also released and met expectations showing a -0.5% fall m/m. GBP/EUR trades around 1.1230.

Key Movers

At the time of writing we have the monthly PMI numbers being released from the Eurozone. The euro has caught a bid with both the French and German readings beating estimates with the closely monitored German Manufacturing number coming in at 45.4 ahead of the 44.6 penciled in. The number is still way below the 50 that divides expansion/contraction however the higher than expected reading has lifted the shared currency. The dominant German export sector has been suffering of late on the back of the US/China trade dispute with hopes that some constructive news will emanate from talks between the two countries at next weeks G20 summit in Buenos Aires. The dollar remains soft at the end of the week as a change of tack from policy makers at the Federal Open Market committee announced Wednesday night weighs on the greenback. The Fed opened the door to an interest rate cut, possibly as early as next month as trade tensions and below target inflation begin to affect the US economy. It looks likely we will see at least one rate cut this year from the Fed in an effort to stave off a potential recession in 2020. As usual yields have fallen with the dollar with benchmark 10 treasuries dropping below 2% overnight for the first time since late 2016 as investors look to park their cash in safer assets. EUR/USD trades at 1.1310 with USD/JPY at 107.45.

Expected Ranges

  • GBP/USD: 1.2630 - 1.2740 ▼
  • GBP/EUR: 1.1170 - 1.1275 ▼
  • GBP/AUD: 1.8290 - 1.8430 ▼
  • GBP/NZD: 1.9240 - 1.9380 ▲
  • GBP/CAD: 1.67 - 1.6870 ▼