GBP/USD - UK Prime Minister Resigns
The UK Prime Minister has been under immense pressure over the past year for various reasons which are not specifically related to his role as head of the UK government. It was announced today that Prime Minister Boris Johnson has decided to step down and confirmed he will support whoever the party wishes to proceed with.
The first reaction from the British Pound is a slight decline following his resignation but overall, the price still remains higher than the market open. Up until the Prime Minister resigned, the price had been increasing in value mainly due to the decline witnessed in the US Dollar across the market. However, even with today’s slight increase in price, the overall price condition still remains within a downward trend. Traders are now likely to be looking for clarity and evaluating how the Pound reacts.
The resignation may come as a surprise to some, but it actually is another political crisis which has been brewing for some time. Only a few weeks ago, after the Prime Minister received a vote of confidence and it was confirmed that Johnson will remain in office, Finance Minister Rishi Sunak, Health Minister Sajid Javid and several others resigned.
Boris Johnson had originally advised that he would not resign. Previously, the politician was accused of violating quarantine rules which was one of the reasons why the Prime Minister was required to obtain a vote of confidence. However, the recently reviewed new allegations directed at former deputy Christopher Pincher, relating to sexual harassment, had led to new calls for Boris Johnson to resign.
Over the past 6 months, the exchange rate has seen significant declines but this has not necessarily been related to the political crisis. The decline has mainly been triggered by poor economic performance seen in the UK and general high demand for the US Dollar due to its safe haven status and the recent interest rate hikes.
Today, there will be a number of speeches scheduled for specific Federal Reserve officials such as James Bullard and Christopher Waller. Traders are still hoping to receive evidence of further monetary policy tightening by the regulator as no major indication was provided last night during the latest Meeting Minutes. According to the Minutes, the stance of the Federal Reserve will depend on how inflation develops.
In addition to the above, the market is also awaiting the release of the US Unemployment Claims which is predicted to have a medium level effect on volatility. In addition to this, the market will also be awaiting the confirmation of June’s Employment Change and the latest Unemployment Rate.
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