UK Currency Shook as Boris Becomes Country’s New Leader
On Wednesday, the UK currency (GBP) barely changed against the greenback even as Boris Johnson became the country’s new Prime Minister.
The British pound remained nearly flat with GBP/USD currency pair trading at 1.2429 by 11.30 PM EST, down only 0.04%.
Boris Johnson, who has in the past, maintained a hardline stance on leaving the European Union was chosen leader of the Conservative Party after defeating his rival, Jeremy Hunt. Boris won by a margin of 2 to 1. After his announcement as the new leader of Britain, Johnson pledged to unite Britain.
In his opening remarks, Johnson insisted that no one party has the monopoly of wisdom. He joked that some people would immediately question their wisdom of choosing him. However, Boris doubled down on his promise of delivering Brexit by October 31. He insisted that it is a do or die scenario and no matter what may happen, the U.K. must leave the European Union. That comes despite a backdrop of concerns over a no-deal Brexit. His position and announcements have large effect on UK currency.
The U.S. dollar climbed to a four-week high on Tuesday after President Trump and Congress agreed on a deal to raise the debt ceiling. That alleviated fears that the government would default. Also, news that officials from Washington and Beijing are set to meet sometime next week boosted the dollar. Despite the positive signs, the trade talks could drag on for months at the minimum for a deal to be struck.
The International Monetary Fund
Meanwhile, the International Monetary Fund lowered its global growth outlook for the second time in 2019. The world economy is expected to expand by 3.2% this year, and improve next year to 3.5%. That is according to the organization’s quarterly World Economic Outlook report released on Tuesday. However, the rates were lower by 0.1% from April projections made by the fund.
The projected growth pickup in 2020 will depend on several key issues such as stabilization in the developing economies and emerging markets, and sufficient trade policy resolution. If any of these fails to materialize, then the projected gains will likely not be achieved.
Further, the leading risk factor, not only to UK currency but also to the global economy ranges from adverse issues such as U.S.-China tariffs, no-deal Brexit, and United States auto tariffs. These risk factors sap investor confidence, weaken investments, and negatively affect global supply chains. Consequently, there is a slow global growth well below the baseline.
The USD/JPY currency pair traded at 108.18, near flat. The AUD/USD pair traded 0.3% down, and NZD/USD 0.1% down.
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