BoJo’s win in UK could prompt sterling fall
The announcement of Boris Johnson as Prime Minister is largely priced in for markets with expectations of a knee-jerk reaction for the pound to the downside.
Johnson, who was elected last night, defeated rival Jeremy Hunt to the keys of 10 Downing St from outgoing Prime Minister Theresa May.
Nigel Green, chief executive of financial advisory group deVere, said sterling would likely fall in reaction but it would not be a major price shock as Johnson’s victory had been already expected by markets for several weeks.
But he said markets could see an economic shock if Johnson went for a no-deal Brexit, as he has claimed he would do during the campaign.
“Sterling is currently floundering due to the ongoing Brexit chaos and uncertainty which has put the brakes on the UK economy,” Green said.
“The pound’s weakness has also been driven by fears regarding Mr Johnson’s embrace of the possibility of a no-deal Brexit on 31 October, with many forecasting an economic shock for Britain if this were to occur.
“However, there’s also an argument to suggest that Mr Johnson’s controversial ‘do or die’ approach – and a hard break - will at least end the years of failed negotiations which have fuelled endless uncertainty for business and the markets.”
Green noted that, while it was a gamble, a quick exit from the EU could actually give investors clarity after years of uncertainty and prompt investment back into the UK by foreign investors.
AUTHOR
Laura Dew
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