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Boris Johnson faces vote of no-confidence

Monday 6 June, 2022

Daily Currency Update

UK Prime Minister Boris Johnson will face a vote of no confidence at 6pm this evening after 54 Tory backbenchers triggered the vote. This has been caused by the ongoing fallout from “Partygate” after Boris Johnson faced further accusations of rule breaking during the lockdowns of 2020 and 2021. The pound was initially very unreactive to the fallout of this scandal when it first blew up, but it will inevitably be vulnerable following today's decision. The pound was already vulnerable prior to the announcement of the vote of no-confidence, due to poor growth outlook and speculation of the Bank of England changing their mind on future tightening. The pound is currently up around 0.45% for the day vs both the euro and the dollar. This could mean that the market is confident in Johnson remaining in his position come the end of the day. Should we see Johnson lose the vote of no-confidence, analysts believe the pound may plummet and push down towards the 1.24 area vs the dollar this week.

Key Movers

We saw continued growth across the US last week as well as strong job market data, giving way for the Federal Reserve to continue on their path of aggressive monetary tightening and increasing of interest rates. This put the dollar back on the front foot after two consecutive weeks of being sold off. The focus for the US this week will be the US CPI report due on Friday, which should confirm the notion of peaking inflation. GBP/USD currently sits at 1.2550, but could be susceptible to some volatility this week. The ECB meeting on Thursday will dominate eurozone headlines this week. Markets are not anticipating a rate hike until July’s meeting, but the reason as to why they are choosing to wait will be in question. Against the dollar, the euro sits at 1.0720, but analysts believe a move back down to 1.06 in the coming days is possible as the dollar gains some of its strength back.

Expected Ranges

  • GBP/USD: 1.2450 - 1.2590 ▲
  • GBP/EUR: 1.1630 - 1.1765 ▲
  • EUR/USD: 1.0680 - 1.0770 ▼
  • GBP/AUD: 1.7290 - 1.7410 ▲