British Pound up vs Dollar as Boris Johnson Announces he is Out of Race for Tory Leadership
The pound / dollar exchange rate bounced on news that Boris Johnson has announced he will not seek leadership of the Conservative party, and the prize that comes with it, that of inheriting the post of Prime Minister of the UK.
- Pound to euro exchange rate = 1.2090 (Live rate here)
- Pound to dollar exchange rate = 1.3461 (Live rate here)
- New Zealand offers trade negotiators for EU / UK negotiations
- HSBC will stay in London
“Markets seem to like that Boris Johnson has pulled out of the race as GBP strengthens,” says a note from Danske Bank Research having observed the initial reaction by Pound Sterling to news the front-runner to become the next UK Prime Minister has pulled out of the race.
Boris Johnson shocked pundits by saying he will not stand for the leadership of the Conservative party.
"Smart move by Boris - He knows MPs would have resisted his challenge. His day will come! Very smart move," says Davd Buik of Panmure Gordon, the comment made in a private capacity.
It is being said that the surprise entry of Michael Gove into the race may have prompted Johnson’s exit.
We saw GBP/USD bounce from 1.3433 to 1.3480 on the announcement.
However, the rally appears to be retracing.
Why would the GBP bounce?
Presumably because the exit gives Theresa May, another favourite for the job, a better shot.
There are suggestions that she is more pro-EU than her fellow Conservative.
However, in launching her bid, May herself said there was no going back on Brexit.
The positions of contenders, Stephen Crabb, Theresa May and Michael Gove will crystallise over coming days once their campaigns start.
Watch: Theresa May ‘Brexit means Brexit’
Procedure and Timeline for Election of Next Prime Minister
As there are more than two candidates, a ballot is held amongst the Parliamentary Party (the MPs) on the Tuesday immediately following the closing date for nominations (Tuesday 5 July 2016).
An exhaustive ballot system is used to select two candidates to go forward to the grassroots membership.
This means that if there are more than three official candidates, candidates will be whittled down (with ballots among the Parliamentary Party alternating on Tuesday’s and Thursday’s) until only two candidates remain.
When two candidates are put forward to the grassroots membership for selection, voting occurs by postal ballot on a 'one member one vote' basis.
This is to occur as soon as is practicable after the date of the last ballot in the Parliamentary Party.
To be eligible to vote, a person must be a member of the Conservative Party for not less than three months prior to the close of the grassroots membership ballot for the election. Estimates suggest there are approximately 150,000 eligible members.
29 June: Open of nominations for potential candidates.
30 June: Close of nominations for candidates at midday, with official candidates subsequently announced.
5 July: First ballot among Parliamentary Party occurs (conditional on three or more official candidates).
July: As described above, the Parliamentary Party continues to host ballots on candidates until only two are remaining to be put forward to the grassroots membership.
July/August: Grassroots membership ballot.
2 September: Date by which we will know who Cameron’s successor is.
Latest post-Referendum Developments
- NZ Offer of Trade Negotiators
New Zealand have offered its top trade negotiators to the United Kingdom ahead of the UK seeking new deals with countries across the globe.
The Telegraph reports the Commonwealth country has made an offer to loan staff to the British civil service, which has few trade negotiators of its own.
Frank Field, MP, says, "New Zealand's offer of trade negotiators is the latest in a long line of Commonwealth support. A post-Brexit world is beginning to emerge."
- HSBC to Stay in London
HSBC have confirmed they are staying in London following the Brexit vote.
HSBC Chairman Douglas Flint said the referendum result would not prompt another review of the HSBC's hadquarter location.
Earlier this year there was anxiety that HSBC would leave the UK having initiated a review into where its headquarters should be located.
- Citi: More GBP Selling to Come
With perhaps a little complacency entering the discussion over Sterling, this reminder from CitiFX:
"Positioning has led to the ongoing bounce in GBP, but there are more clients left to sell. Price action today should convince you Leveraged interest in adding to GBP downside here may be somewhat limited.
"On a 1m horizon GBP outflows are at the strongest we've recorded since 2012. It is too early to call how the long-term capital will behave, but we suspect there will be more GBP selling to come."
