By Lukman Otunuga, Senior Research Analyst at FXTM
The ever-changing landscape of modern-day politics in the United Kingdom has taken yet another twist, following the confirmation that Boris Johnson has been named as the new UK Prime Minister.
Johnson secured more than 92,000 votes in the Tory leadership contest, in comparison to rival candidate Jeremy Hunt, who got approximately 46,000 votes.
When considering the high probability that Johnson would be declared the undisputed victor when he entered the leadership race a few weeks ago, the results do not signal a whitewash victory, but this is still a strong win for the new UK Prime Minister.
What does Johnson’s victory mean for Brexit?
Of course, the key question now for investors is what does this means for Brexit?
The new Prime Minister is, after all, assuming the mantle of leadership at a time where there is no clear majority in Parliament, the clock is ticking fast to the October 31 Brexit deadline and with a troubled Pound that has been left in limbo by Brexit confusion for the majority of time since the historic 2016 EU referendum.
Given how the new PM has repeatedly pledged to leave the European Union with or without a deal on October 31, investors will be observing nervously if Johnson can “walk the walk” after “talking the talk” on securing Brexit.
EU unlikely to reopen negotiations
Amid all the uncertainty and chaos swirling around Brexit, there are few things that are clear. But, one of them is that the European Union is highly unlikely to re-open talks on the Brexit withdrawal agreement, leaving Johnson’s options as highly restrictive.
A difficult task ahead for new PM as Brexit clock counts down
Johnson certainly has a mammoth task ahead of the EU exit date as he inherits a Conservative party fractured by Brexit. With Chancellor Philip Hammond intending to resign on Johnson becoming PM and Alan Duncan already quitting as Foreign Office minister, matters do not bode well for political certainty.
Make no mistake, Boris Johnson’s first speech as Prime Minister when entering 10 Downing Street for the first time on Wednesday is absolutely critical. Any comment that is made on Brexit will be like letting a pin drop in a silent room.
Should Johnson unexpectedly dial down on his Brexit “do or die” by October 31 rhetoric, the Pound will be handed an unexpected lifeline as concerns over a no-deal Brexit recede, as unexpected as this might seem.
Next season of Brexit saga to feature Johnson as main character
One thing that is clear is that the real action in the next feature film on Brexit is that this is just the beginning of a new era. Investors should fasten their seat belts and prepare for a turbulent ride in the months ahead for the British Pound as “Brexit season 4: Boris in Power” kicks off.
Pound remains sick man of G10 space
Sterling jumped towards 1.2480 against the Dollar before later surrendering most of the gains, following news that Boris Johnson secured the title as the new Prime Minister.
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The Pound remains one of the sick men in the G10 space as it has weakened against every single G10 currency this month. Where the GBP concludes this week will be heavily influenced by how markets react to the new Prime Minister’s speech to the nation on Wednesday.
Technical traders will continue to observe closely how the GBPUSD behaves around 1.2420. An intraday break below this point may open a path towards 1.2400 and 1.2350 in the near term.
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