The British Pound is skyrocketing! And for Jeremy Corbyn this morning is a mega disaster! Boris Johnson and the conservatives win an unforeseen landslide victory in the British parliamentary elections. With 650 constituencies, the majority is 326 votes. According to the latest count of 363 seats in parliament, Johnson has a clear absolute majority. Corbyn gets only 203 seats. Thus the political conditions in Great Britain are finally clarified, and also cemented! There will no longer be any ambiguities about the British Brexit policy.
As Boris Johnson said earlier, Britain will leave the EU “without ifs or buts” on 31st of January 2020. A second referendum on Brexit is ruled out. But let’s not forget: the Scottish National Party has become even stronger in this election in Scotland. And the probability that there will be a second referendum in Scotland on Scotland’s withdrawal from the state structure called Britain is increasing significantly. And this time a majority of the Scots could vote in favour of leaving, as the Scots definitely want to remain in the EU! There could still be real problems!
The British Pound is on the rise
But first of all, the situation is crystal clear. Boris Johnson will soon lead the country out of the EU, with the agreement he recently negotiated with Brussels. The British Pound is pleased. It has been bullish for days, but what happened now could not have been foreseen for foreign exchange traders. The Pound is currently rising to its highest level since summer 2018 against the US Dollar. From 11 p.m. German time yesterday evening, when the polls closed and the first post-election polls were published, it was clear that Boris Johnson would win colossal. From 1.3172 Pound vs USD tonight jumped immediately to 1.3513 at the peak. The pair currently stands at 1.3420, still about 250 pips higher than last night! Wow, what euphoria.
Perhaps one forgets: From February onwards, Boris Johnson will have eleven months of transition until the end of 2020 to negotiate and conclude a trade deal with the EU as a country that has left the EU! That can still be cheerful. But at least, one might say, he has a very clear political backing. The drama in London is over and clear conditions prevail. The fact that things are finally moving forward, almost no matter how makes the currency market probably pleased about this at the moment. If they weren’t happy too soon?
Just like the US Dollar, the Euro is currently losing ground against the British Pound. EURGBP loses overnight from 0.8450 to 0.8320, its lowest level since April 2017. The following chart shows Euro vs British Pound over the last four years.