Boris Johnson cleared the first hurdle in his campaign to become Prime Minister Theresa May’s successor by claiming the top spot in yesterday’s leadership vote. Of the 10 candidates, 3 failed to receive the required 17 votes to proceed to the next round.
Johnson received 114 votes out of a total of 313 with Foreign Secretary Jeremy Hunt coming in second with 43 votes and Michael Gove in third with 37.
Given the surprise margin of Johnson’s advantage bookmakers have given him a 75% chance of becoming the next PM.
Sterling investors aren’t keen on Johnson winning because of concerns he will lead the UK towards a disorderly exit from European Union. But like him or loathe him, his trademark no-nonsense approach to Brexit may eventually come as a relief to investors and business leaders struggling to prepare for the future amidst 3 years of uncertainty. Contrary to speculation, Johnson has said he would prefer to renegotiate a deal than leave without one, but has said deal or no deal, the UK will leave the EU on October 31st.
GBPEUR opened at 1.1218 and held steady until lunchtime when it rose sharply to reach a high of 1.1262 before closing at 1.1245.
GBPUSD remained fairly rangebound throughout the day, trading between a low of 1.2670 in the morning and a high of 1.2703 in the afternoon.
The US dollar remained steady on Thursday as investors chose to avoid taking large positions ahead of next week’s Federal Reserve meeting and the G20 summit at the end of the month. The dollar has fallen from 2-year highs seen in May as financial markets are concerned the trade disputes between the US and its trading partners will continue to have a negative effect on economic data, forcing the Fed to reduce interest rates.
Industrial production in the Eurozone fell less than expected in April, dropping 0.4% after a 0.7% decline in March, compared to market expectations of a 0.5% drop. Decreases in capital and intermediate goods output led the fall. On a MoM basis industrial production decreased by 0.50% in April which matched estimates.
EURUSD opened near to the high of the day at 1.1300 and drifted down towards a low of 1.1272 shortly before markets closed.