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Sterling Rallies On Johnson Resignation

Sterling Rallies On Johnson Resignation

Boris Johnson announced on Thursday he would be resigning as British prime minister after dramatically losing the support of his ministers and most Conservative lawmakers.

After more than 50 government ministers and aides quit, lawmakers stated the obvious that he must go, to which a powerless Johnson announced it was clear his party wanted someone else in charge.

Sterling rallied on the news with economists now asking what the change in Downing Street means for the Pound and the general UK economic outlook. Nearer-term it also appears that the Conservative Party are pushing for the tax hikes put in motion by the previous Chancellor Rishi Sunak to be reversed or cancelled.

Plans for the conservative leadership race will be signed off on Monday by the party’s 1922 committee of backbench MPs. The MPs hoping to succeed Boris Johnson are thought to be ex Chancellor Rishi Sunak, foreign secretary Liz Truss and Defence Secretary Ben Wallace.

As trading gets underway this morning, EUR/USD opens around the 1.016 threshold. A firmer tone to sterling is being reflected by GBP/EUR operating back above the 1.18 mark whilst Cable (GBP/ USD), still trading lower, changes hands around the midpoint of 1.19-1.20 handle.

Datawise, the main data highlight today is the US labour market report. Payrolls are forecasted to have risen by 268k in June, down from 390k in May. The unemployment rate is expected to be unchanged at 3.6%. The release poses some event risk for the dollar so volatility could occur prior and post announcement of figures. From a euro standpoint, ECB President Lagarde has a speaking arrangement today which will be watched very closely as any negative signs could see the euro potentially fall to or very close to parity versus the US dollar.

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