GBP/USD: Bears hold the reins amid UK politics/Brexit pessimism

  • Boris Johnson’s election as the British PM highlights no-deal Brexit risk.
  • Key UK lawmakers recently announced resignations over their disagreement with Mr. Johnson’s EU departure bias.
  • Appointment of new lawmakers, PM May’s last speech will be crucial to follow.
Boris Johnson’s victory in the Tory leadership race fuelled no-deal Brexit fears and resulted in several resignations of key lawmakers. The same stretched the GBP/USD pair’s south-run to 1.2430 heading into the London open on Wednesday.

Mr. Johnson became the new British Prime Minister (PM) after beating his rival Jeremy Hunt by 92,153 votes to 46,656. At his speech as the PM, Johnson reiterates October 321 deadline for Brexit.

Despite major market consensus and political fears, Johnson’s win was taken as a British Pound (GBP) negative as it followed a slew of resignations from some of the key UK lawmakers, including International Development Secretary Rory Stewart and Justice Secretary David Guake and Foreign Office Minister Sir Alan Duncan. It should also be noted that Chancellor Phillip Hammond previously announced that he’ll resign immediately after Johnson’s win but has refrained from further communications so far.

Looking forward, the ex-PM May will deliver her last speech as the key Tory member sometime in the middle of the day while heading to resign at the Queen’s palace. Even if she has already offered her support to Boris from backbench, she might refrain from politics in the future considering the disappointment received due to the Brexit.

Further, Boris Johnson will also deliver a speech as the UK PM and might also reveal details of his new team. The BBC has already said that Mark Spencer, MP for Sherwood in Nottinghamshire, will become chief whip for the Commons. However, many key positions are still left for announcing any might trigger GBP volatility.

Given the increasing odds for no-deal Brexit, EU officials are also to hold emergency Parliament meeting over the issue, as said by the BBC and the same could add liquidity into the pair.

It should also be noted that the US is up for publishing July month key Purchasing Managers’ Index (PMI) numbers, coupled with June month New Home Sales, that could gain market attention amid latest US Dollar (USD) surge.

Technical Analysis
Unless clearing late-June low surrounding 1.2510, prices are less likely to avoid visiting 1.2382 again, a break of which can recall 1.2300 back to the chart. Though, an upside clearance of 1.2510 highlights 1.2580/85 for buyers.