Boris wins Tory leadership election
After winning roughly two thirds of the Tory memberships’ vote, Boris Johnson has just been announced as the new Tory leader and will officially become prime minister tomorrow.
This was widely expected and the market will now be looking at how many more ministerial resignations will follow this result and, more importantly, who Boris will choose to make up his new cabinet. Investors will also be analysing how seriously he is prepared to pursue a no-deal Brexit after his aggressive tone in the leadership campaign.
He will certainly have a tough job on his hands as he tries to bring his party and the country together. The numbers in parliament remain the same, with the Tories only having a slim majority from the support of the DUP, and his own party look set to block his no-deal Brexit plan.
The Pound has remained fairly steady so far, as the result had been largely priced-in over the past few weeks. Although we might expect to see a bit of profit-taking on the Pound’s previous fall and therefore a bit of a bounce. Sterling gains should remain relatively capped, however, as the uncertainty and risk of a no-deal still remain. Furthermore, the Bank of England continue to be more pessimistic about the economic outlook which should also keep the Pound subdued. Until we see any positive Brexit news/developments (e.g. some sort of resolution over the Irish border), then any significant gains are unlikely.
We will have to wait and see how the new negotiations with the EU work out. It should certainly be an interesting few weeks.