- UK PM May is set to step down and Boris Johnson is the leading candidate to replace her.
- The erratic former Foreign Secretary may increase GBP/USD volatility.
- Despite his Brexit credentials, he could still lift the pound.
After a tear-provoking meeting with her backbenchers, UK PM Theresa May pledged to set a date for her departure after the upcoming Brexit vote in early June. And she will do regardless of the result. It is now clear that “The end of May is in early June.”
For pound traders, there is no time to delve into May’s legacy but to look to the near future with the clock ticking down to Brexit, due on October 31st. On the same day that May faced her political executors, her former Foreign Secretary Boris Johnson threw his hat into the ring. His early announcement was well-timed, and most British newspapers put his picture on their covers.
Johnson is the leading candidate as he is popular among the membership of the Conservative Party. Under current party rules, MPs filter candidates until two are left. Assuming he makes to the shortlist of two, he is set to enter Downing Street.
GBP/USD already fell on the specter of PM Johnson
The former London mayor, in addition to his role as FM, is a eurosceptic, was one of the proponents of Brexit in the referendum, and also quit May’s government over a Brexit strategy that was not “clean” or hard enough.
The pound dropped on the latest political developments, including Labour’s decision to end cross-party talks. Johnson’s probable ascent contributed a lot to the mix.
Apart from his senior posts, Johnson is known for his gaffes and erratic style. If he becomes PM, his unscripted comments may result in sharp moves in the pound. That can be taken as a certainty.
But will the pound keep on falling?
Another characteristic of Johnson is his love of himself and another one his aspiration to become PM. He wrote a biography of Long before announcing his candidacy, he wrote an admiring biography of Winston Churchill, the heroic PM during the Second World War.
After achieving his career goal of entering Churchill’s role, the colorful Mr. Johnson may want to cling to power more and creating a worthy legacy, like his protagonist. And for that, he may follow the footsteps of another wartime hero: Charles De Gaule. The French President vowed to keep Algeria French and then made a 180-degree about-turn.
Johnson may do a De-Gaulle on Brexit.
In order to secure his legacy, he may want to maintain the health of the UK economy and the unity of its people. If he indeed steps away from his rhetoric on Brexit and finds a compromise with the EU, he will be instantly rewarded by a stronger pound.
All in all, Boris Johnson cares more about Boris Johnson and than about Brexit, and his colorful style may result in surprising rather than dogmatic moves.