Home Daily Commentaries Johnson wins second round vote to be PM – Raab eliminated

Johnson wins second round vote to be PM – Raab eliminated

Daily Currency Update

GBP - British PoundThe second round of voting to be the next Conservative Party leader and Prime Minister saw Boris Johnson romp to victory again gaining 126 votes of the 313 available. Jeremy Hunt came second and Michael Gove third with 46 and 41 votes respectively. Dominic Raab was eliminated from the vote after not attaining the 33 votes needed to continue to round four. Being a Brexiteer it seems likely many of Raab's voters will get behind Johnson in round three this afternoon who remains odds on favourite to get the job at 1/7. The five remaining candidates Johnson, Gove, Hunt as well as Rory Stewart and Sajid Javid faced a televised debate on the BBC last night where Brexit was the main talking point. Questions were asked via video link by members of the public with some notable eye-rolling from the public whos' questions were ducked by the would be PMs. Today's big data from the UK is this morning CPI figures with a move back to the Bank of Englands target 2% eyed from its current 2.1%. Dont expect too much action with the pound should this not be seen as sterling is being driven by events in Westminster currently.GBP/USD has picked up a little over the past 24 hours with a break below 1.25 avoided with the pair now trading at 1.2550. GBP/EUR hovers around the 1.12 handle.

Key Movers

Yesterday's big news was a sharp drop in EUR/USD on the back of some dovish comments from European Central Bank chief Mario Draghi. The euro dropped around 60 pips as a speech by Draghi at the Central Banking Forum in Sintra, Portugal saw him state that there were still various tools at his disposal to stimulate the EZ economy in the face of falling inflation and subdued growth. Markets are now expecting some loosening in policy by way of a rate cut possibly as soon as July should data between now and then justify the move. In response to the comments US President, Donald Trump took to Twitter to condemn the possibility tweeting: "Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others."Around an hour after Draghi's comments more fuel was added to the rate cut fire as the closely watched German ZEW Economic Sentiment Survey fell well short of the expected -5.7 showing -21.1, its lowest reading since November last year. China/US trade tensions, the recent bombing of oil tankers in the Gulf of Oman, and the rising chances of a no-deal Brexit are weighing on the minds of the economists who took part in the survey doing little to support the shared currency. EUR/USD is back under 1.12 just a week after a move to 1.14 was looking on the cards. Risk assets were given a boost by another Trump tweet later in the day where he stated: "Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting."Brent Crude pushed up around 4% throughout the afternoon topping out just shy of $63pb, the Aussie and Kiwi both gained against the greenback and equity markets, already buoyed by Draghis comments also rose.Today's big event is the latest interest rate decision from the US Federal Reserve this evening with a hold at 2.5% eyed. The statement and Fed Chairman, Jay Powell's presser will be the main talking point with markets expecting a loosening in policy to be telegraphed possibly, as soon as July. We also have GDP figures from New Zealand tonight.

Expected Ranges

  • GBP/USD: 1.2510 - 1.2640 ▲
  • GBP/EUR: 1.1145 - 1,1270 ▲
  • GBP/AUD: 1.8220 - 1.8350 ▼
  • GBP/NZD: 1.9180 - 1.9315 ▼
  • GBP/CAD: 1.6755 - 1.6890 ▼