Home Daily Commentaries Boris Johnson’s survival brings stability to the pound

Boris Johnson’s survival brings stability to the pound

Daily Currency Update

The pound rose yesterday afternoon as investors continued digesting Boris Johnson’s win in the vote of no confidence. Sterling was volatile on Tuesday after falling to a near three-week low against the US dollar, with investors on edge a day after British Prime Minister, Boris Johnson, survived a confidence vote.

Johnson won the vote by 211 votes to 148, seeing off a challenge to his leadership brought by lawmakers from his Conservative Party. But the larger than anticipated rebellion leaves him battling to win back the confidence of his colleagues and the public. Now that Johnson has survived the vote, he is likely safe for another year. Therefore, there is less uncertainty around his leadership. That said, it has not completely cleared up, so the pound may find its recent gains limited.

The euro, meanwhile, may have suffered a setback yesterday after some poor German data. Factory orders in Germany contracted by 2.7%, rather than growing by 0.3% as economists had expected. Germany is Europe’s largest economy and an industrial powerhouse. A drop in factory orders could spell trouble for the Eurozone.

This is the third successive month of declining orders in Germany. The country, which was still impacted by the pandemic, has been affected by the Russia-Ukraine war, surging energy prices, supply-chain issues, and recent lockdowns in China. Attention now lies with the European Central Bank meeting on Thursday to see what the rhetoric will be for future interest rate increases.

Key Movers

The US dollar rose this morning with risk sentiment on the wane as central banks tighten monetary policy, which could be weighing on global economic growth. Central banks around the globe have started to respond to soaring inflation by tightening monetary policy, which had been very loose in the wake of the COVID-19 pandemic.

The US Federal Reserve is expected to raise its benchmark funds rate by 50 basis points next week and again in July, while the European Central Bank meets on Thursday and is expected to lay the groundwork for a potential interest rate rise next month.

Expected Ranges

  • GBP/USD: 1.2515 - 1.2605 ▲
  • GBP/EUR: 1.1705 - 1.1795 ▲
  • GBP/AUD: 1.7355 - 1.7465 ▲
  • EUR/USD: 1.0625 - 1.0705 ▼