The British pound is rallying on Tuesday after it was confirmed that former London Mayor Boris Johnson would become Britainâs new prime minister. In addition to a higher pound, European markets appeared to cheer on the pro-Brexit politician as leading indexes recorded 1% gains. But that did not prevent disappointing data from capping the currencyâs ascent.
Shortly after Prime Minister Theresa May announced that she was stepping down, the Conservative Party ran a leadership a race. In the end, Johnson overwhelmingly defeated his main Remain opponent, Jeremy Hunt, by winning two-thirds of the votes in a ballot of approximately 160,000 tory members. Johnson is expected to receive the keys to 10 Downing Street from May on Wednesday.
Johnson delivered a speech after nabbing the nomination, promising to give the country Brexit, unite the people, and resoundingly defeat Labour in May 2022.
He received congratulations from leaders all over the world, including President Donald Trump, who tweeted:
Congratulations to Boris Johnson on becoming the new Prime Minister of the United Kingdom. He will be great!
One of the biggest issues for Johnson to grapple with is Brexit. Michel Barnier, the European Unionâs chief Brexit negotiator, said that he is looking forward âto working constructivelyâ with the new prime minister. But the 28-nation trade bloc has insisted that it will not renegotiate a withdrawal agreement â the initial one was repeatedly rejected in the House of Commons. Johnson has conceded that if no new pact is agreed upon, then Britain will leave the EU on Halloween âcome what may.â
On the data front, the Confederation for British Industry (CBI)’s Business Optimism Indicator for the UK slipped 19 points to -32 in the third quarter of 2019, the lowest reading since Q3 2016. The measurement of business confidence has not been in positive territory since the first quarter of last year.
Also, the CBI industrial trends orders fell 19 points to -34 in July, which represents the lowest level since April 2010.
Britain enjoyed strong retail sales in June, advancing 1% from the previous month. The numbers surprised markets because analysts had anticipated a decline of 0.3%.
European financial markets soared on Tuesday. The FTSE advanced 0.87% and the FTSE MIB rose 0.96%.
The USD/GBP currency pair rose 0.32% to 0.8041, from an opening of 0.8015, at 13:55 on Tuesday. The GBP/EUR rose 0.18% to 1.1148, from an opening of 1.1130.
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