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25.06.2019 01:34 AM
GBP/USD. A family scandal lowered Johnson's rating and supported the British currency

The pound-dollar pair within the 27th figure had increased by over 200 points during the week. The British currency has moved away from the price lows of the year and is now trying to show character using the greenback's weakness. However, not only is the dollar devaluation pulling up the GBP/USD: for the first time in a long time, the pound had its own growth arguments, which appeared from a rather unexpected side. And although the general uncertainty still puts pressure on the pair, buyers are using every opportunity to prolong the period of the corrective price increase. Today, the GBP/USD pair has reached the resistance level of 1.2770 (the top line of the Bollinger Bands indicator on the daily chart), but could not break through it, but the potential for further growth still remains.

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Against the background of an almost empty economic calendar, the British currency reacts to news of a political nature. Let me remind you that now in Britain there is a struggle for the post of head of the leading Conservative Party, and in fact for the post of prime minister of the country. After several rounds of voting, two candidates entered the "finals" of the political race: ex-foreign minister Boris Johnson and current foreign minister Jeremy Hunt. Throughout the pre-election period, Johnson, who is known for his tough position on Brexit, was considered the undisputed favorite of the race. He is in favor of revising the terms of the deal, but at the same time he opposes the extension of the negotiation period after October 31. In his opinion, Brexit should take place at all costs on November 1 - with or without a deal. A "hard" Brexit does not frighten Johnson, moreover - he threatened Brussels not to pay the multibillion-dollar amount of "compensation" until Europe reconsiders the terms of the agreement with London.

In other words, his coming to power does not bode well for the pound, given the position of the British regulator, who, in fact, "tied" the question of Brexit to the prospects of monetary policy. It is for this reason that the British currency has been under strong pressure for several weeks: Johnson has maintained an undeniable advantage in the political race all this time, and this fact increased the likelihood of a "chaotic" Brexit. Hunt, following several rounds of voting, lagged behind the leader of the election campaign by several dozen points and seemed to have no chance of winning. But, as it turned out, everything is possible in politics, and even more so in British politics.

According to the results of the latest opinion polls, Boris Johnson not only lost his advantage in the overall rating over his main opponent Jeremy Hunt, but is now behind him. The reason for this, oddly enough, was the personal life of Johnson, namely his quarrel with the mistress. At the end of last week, the neighbors of the couple recorded the audio of the beats and female cries that were heard from their home in London. They even called the police, but law enforcement officers only recorded the fact of a family quarrel without any offenses.

But after this incident in the UK, a rather heated debate began on whether Boris Johnson is capable of being prime minister, given his personal qualities, in particular, stress tolerance. He added fuel to the fire and his public reaction to this incident. He refused to answer the question about this situation, saying the following: "I believe that people do not want to hear about such things." After this, Johnson was even criticized by his colleagues in the Conservative Party. In particular, Tory deputy Malcolm Rifkind accused him of hiding "important information for the public," and former Foreign Minister Alan Duncan said that Johnson now has a "big question mark over his head."

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As a result, a domestic family conflict has found fatal consequences for an odious candidate: after the incident, Johnson's leadership declined among all voters and among Conservatives. The latest poll showed that 29% of all voters consider Boris Johnson to be the most optimal prime minister, while Hunt was supported by 32%. Among members of the Conservative party, Johnson's leadership also declined (from 55% to 45%), while Hunt's position increased from 28% to 34%.

In addition, according to the British edition of The Times, even if elected, Johnson can pass a vote of no confidence - if he tries to withdraw the country from the European Union without a deal on October 31. According to anonymous sources, the Labour Party initiates a Parliamentary vote on this issue nearly on the first day of Johnson's term in office. According to the publication's interlocutors, a significant part of the Conservatives will support Labour, especially if Johnson does not abandon the idea of extending the negotiation process after October 31.

On the one hand, such information reduces the likelihood of the implementation of a "hard" Brexit. On the other hand, the published information is in the nature of rumors, which are often not confirmed. Johnson's downgrade is good news for GBP/USD bulls, but even against the background of the scandal, he retains leadership among members of the Conservative Party (although the gap with Hunt has significantly decreased).

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Thus, the controversial fundamental background does not make it possible for bulls of the pair to break through the resistance level of 1.2770 and enter the 28th figure. But if Johnson's rating will continue to fall, and the dollar will still be under pressure from the US Federal Reserve's position, these price targets will be easily overcome by GBP/USD bulls.

Irina Manzenko,
Analytical expert of InstaForex
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