The British pound rose up on Monday against an extensively weaker dollar, hours before Prime Minister Boris Johnson was about to face a confidence vote called by conservative party members.
The Votes:
Boris Johnson is seen surviving for votes after the lawmakers in governing Conservative Party questioned the British leader’s flagging authority over the ‘partygate’ scandal, for which the police authorities fined for breaking COVID-19 Lockdown rules.
Also, the head of currency strategy at Citi Vasileios Gkionakis ascribed Monday’s pound’s strength to the weaker dollar which faced pressure as other central banks, including the European Central Bank flag interest rate rises.
Vasileios Gkionakis statement:
However, the dollar is 0.2% down – USD.
Vasileios stated that the faithless votes immediately transfers to regime uncertainty, so we shall see sterling under pressure.
‘I think the market may be pricing the possibility that if Johnson is removed as the leader, then we may have a shift in UK policy especially in what concerns the fiscal stance’, Gkionakis added.
At 0826 GMT, sterling geared up to 0.62% higher than dollar at $1.25690. GBP=D3 It rose 0.45% to 85.465 pence versus the euro EUR GBP=D3.
Additionally, many analysts too saw development as the pound rises.
However, ING Bank analysts noted that the pound had been inactive when the “partygate” scandal first erupted and even the prospect of a leadership change may not have many suggestions policy-wise.
‘That said, the pound remains vulnerable in the short term given worsening growth prospects and a potential re-pricing of BoE rate expectations,’ they wrote.
Likewise, Vasileios Gkionakis noted low household savings ratios and stated, ‘Fiscal policy has not been as forceful as one would have wanted in order to cushion the blow from higher energy prices. I think this is going to be the main driving factor.’
