IFX Market Report: Wednesday 24th July 2019

As widely expected, Boris Johnson won the Conservative party leadership campaign yesterday and will become Prime Minister Theresa May’s successor later today. In a speech after his victory was announced, Johnson said his priorities were to deliver Brexit, unite the country and to defeat Jeremy Corbyn.

Johnson’s new cabinet is expected to the be roughly two-thirds Brexiteer and one-third Remainers and his team have revealed he is likely to appoint a record number of ethnic minority politicians and increase the existing number of 5 female cabinet members.

The new administration will go back to European Union negotiators and attempt to replace Theresa May’s hugely unpopular withdrawal agreement, but EU officials have repeatedly said nothing will be changed. Johnson has always said the UK will leave the EU on October 31st with or without a deal so it remains to be seen who will be the stronger at the negotiating table over the next 99 days.

GBPUSD climbed from a low of 1.2422 to reach a session high of 1.2473 shortly after the leadership announcement, the pair settled as the day continued, closing roughly flat on the day at 1.2447. This morning the pound has begun to strengthen again touching 1.2484, but still remains below the key 1.25 level.

GBPEUR opened at 1.1114 and climbed across most of the day, reaching a high of 1.1164 and closing at 1.1153. This morning the pair reached a high of 1.1206.

The US dollar rose on Tuesday against a basket of currencies after the US government agreed on a two-year deal to lift government borrowing limits to cover spending. Gains also came from the IMF raising its forecast for US growth in 2019 and news that US negotiators will head back to China to continue trade talks. The dollar index that tracks the greenback against the euro, yen and sterling was up 0.47%.

The euro was generally weaker as investors prepared for fresh stimulus measure from the European Central Bank, falling 0.52% against the dollar and 0.16% against the yen. Markets are largely expecting a 10-basis-point rate cut as well as plans for multi-year loans.

EURUSD opened at 1.1192 and fell steadily across the day, touching a 7-week low of 1.1144 before closing at 1.1150.

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