Petr Krpata, chief EMEA FX and IR strategist at ING, points out that in the UK, after winning the leadership battle with a comfortable margin (with around two thirds of the votes), Boris Johnson is set to appoint senior cabinet figures this evening, with more pro-Brexit candidates being appointed.
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“Like his predecessor, the new PM is likely to face an uphill battle given the divided parliament and no consensus on the shape of a Brexit deal among MPs. As a result, we think a general election is increasingly likely – maybe even inevitable. This suggests a softer pound (EUR/GBP closer to 0.95 and GBP/USD below 1.20 in the case of a general election) meaning that any GBP strength should be faded in our view.”
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