The pound will “finally stabilise” after a brief period of volatility when UK Prime Minister Boris Johnson leaves office, according to the CEO and founder of a leading independent financial advisory and fintech.
On Wednesday, the PM suffered more resignations in one day than any prime minister in history and is desperately clinging to power, forcing the UK currency to trade around the weakest level since early 2020.
“Johnson made it clear in Parliament that he had no intention of stepping down, but it increasingly looks like the decision is no longer his after an unprecedented avalanche of resignations from his own ministers,” Nigel Green of the deVere Group said Thursday.
“This is the beginning of the end for his administration, and it is a question of ‘when’ not ‘if’.”
Green added that when Johnson does leave Number 10, “we’re confident it will ultimately give the pound a boost.
“Sterling has been one of this year’s worst-performing major currencies, down more than 10% against the dollar, amid concerns about a severe economic slowdown, red-hot inflation and, yes, the swirling political chaos, primarily centred around the Prime Minister.”
The deVere CEO had said a day earlier that when names are put into the ring to become the next leader, and policy agendas of the frontrunners are known, “the pound can be expected to become highly volatile – just as it did during the Brexit negotiations.
“The issues laid bare by Johnson’s possible successors that will impact the pound would include the UK’s relationship with the EU and single market access, fiscal stimulus and the Northern Ireland protocol, amongst others.”
Stabilise after turbulence
However, Green said following this bout of turbulence triggered by uncertainty, “we can expect the pound to finally stabilise.”
He noted that a strong and stable leadership is likely to get the pound back on track to a large extent.
“Currencies typically like strong, unifying leaders. The current politics around Boris Johnson is toxic; it’s a distraction and makes an already weak pound weaker.
“Clearly there are other contributing issues to the weakness, but make no mistake, Johnson’s shenanigans are a major factor.”
The deVere Group CEO added that the European economy’s possible looming recession is “going to hit the euro, which is likely to lift the pound.”
He concluded that “the Boris issue has dragged on the pound for a year or so – this weight could be lifted if he is replaced by a more stable and sensible leader.”