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May Out, Johnson In! What Does That​ Really Mean?

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It’s the news that’s been coming at us all summer-long. Boris Johnson has, as many suspected he would, triumphed over his compatriot, Jeremy Hunt, and has been elected the leader of the Conservative Party, succeeding Theresa May. What does that really mean? How will this affect the markets and what’s next? That’s what we’re here for…

So, BoJo is now the PM?

Around 11am on Tuesday morning, the worst kept secret in politics broke – Boris was announced as the leader of the Conservative Party, winning a total of 92,153 (66%) votes to Jeremy Hunt’s 46,656.

So, he’s the PM, right? Well, you’d think so, but not quite! The divisive politician may have been elected as leader of the Conservative Party, but he’s technically not the Prime Minister, yet. That’s a whole other question. 

The Conservative Party only rule by a teeny-tiny majority of four in Parliament, which means that they need smaller parties — principally the Democratic Unionist Party (DUP) — to back them up when the chips are down. Take away that support (which may well happen), and they have no majority whatsoever. Oops!

In that scenario, it’s highly probable that the UK would face yet another General Election, which would probably take around three months to prepare for, taking the UK dangerously close to the EU’s Brexit deadline of 31st October. Double-oops!

Imagine this… A new government may look to either:

  1. Go through with a no-deal Brexit — ouch; 
  2. Seek to delay the Brexit deadline further in the hope of securing a deal;
  3. Hold a second referendum on it; 
  4. Or cancel Brexit entirely! 

The possibilities are endless and this all shows that this particular fairy tale is far from over.

What was the initial market reaction?

The expectation of Johnson’s victory was so great that the markets had actually priced in his win. The GBP saw a positive, albeit pretty tiny, bump, as traders appeared to go for the age-old ‘sell the rumour, buy the fact’ reaction. Though the next morning the markets woke to the GBP/USD pair dipping to a low of 1.2430.

All eyes will now be on the new premier’s Brexit strategy – should he maintain that majority – and which of his chums he decides to invite into his cabinet.

Another thing to keep an eye on is the blossoming friendship between the US president and the UK’s potential new PM. If Johnson was to push for a no-deal Brexit, he’ll certainly hope that he can secure a trade deal with his buddy Don, as soon as possible. Who knows, perhaps it’s already done?

Potential volatility inbound

What will happen next is really anyone’s guess. It’s all just a big pile of “who knows?”, really! New information continues to flow every minute and we definitely advise traders to keep a keen eye on any and all developments here and watch for potential high volatility in the markets as the future looks far from certain.

What else is going on out there?

Take your pick…There’s continued geo-political issues in the Middle East; Trump is ruffling yet more feathers (what else is new), and it’s earnings week in the US, when hundreds of large companies will release their earnings. A trader’s paradise, if you will.

Keep your eyes on Apple, Amazon, Tesla, and Google stocks, and if you’re looking to dip your toes into the market, remember you can trade CFDs on stocks in all of these companies, as well as GBP and USD pairs, CFDs on oil and hundreds of others with TIOmarkets. All you need is to get yourself a monthly subscription, packed full of exciting benefits… We’ll be waiting for you!

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