The British currency successfully started the new week, despite the political passions that flared up in Parliament. They are associated with a vote of no confidence in Boris Johnson, the Prime Minister of Great Britain. However, in the future, luck turned away from the pound.
Earlier, representatives of the country's Conservative Party expressed their lack of confidence in the head of the British government. A similar question arose in connection with Johnson's violation of the quarantine regime during the period of lockdowns introduced due to the COVID-19 pandemic. Recall that the so-called "COVID parties" were held at the residence of the prime minister in 2020 and 2021. At the same time, Johnson does not deny the fact of his participation in them and repeatedly apologized. However, such behavior could cost the career of the head of the British government.
Johnson categorically disagrees with this measure of punishment and is not going to leave the post of prime minister. He considers his resignation inappropriate, believing that he will benefit the country, since "there are many tasks before the government that need to be solved."
Against this background, the British currency gained confidence, rising throughout Monday, June 6. Political turmoil did not prevent the pound's appreciation against the euro and the greenback. At the beginning of the week, the pound gained 0.40% against the dollar, hitting 1.2540. The GBP/USD pair cruised around 1.2472 on Tuesday morning, June 7, having lost the lion's share of its gains.
Political clouds in the British sky have slowed down the pound's succeeding growth, although its rise was cautious. After a vote of no confidence in Johnson from the ruling Conservative Party, the pound began to drop. Note that the head of the British government managed to keep his post. Against this background, the pound's confident rise came to naught, although the latter struggled to stay afloat.
The British currency is pro-cyclical and risky, while actively rising against the dollar and the euro if market sentiment is positive. At the moment, the vector of these sentiments is directed towards a positive trend, thanks to which the pound receives support.
The reasons for traders' positive interest in British politics and the GBP are explained by the stability of the national economy. According to analysts, if Johnson leaves the post of prime minister, the economic trajectory of the UK will remain unchanged. Only the political and economic contradictions related to Brexit can have a serious impact on the dynamics of the pound.
Global sentiment, macroeconomic data on the UK and the prospects for the monetary policy of the Bank of England are of decisive importance for the pound. According to Viraj Patel, currency strategist at Vanda Research, "the vote of no confidence in Boris Johnson was not an event for the markets. The threat to the pound is only the risk of early general elections." However, such an event is unlikely, believes Patel.
A similar opinion is shared by many analysts and market participants, who note that the vote of no confidence in the British prime minister did not have a significant impact on the dynamics of the pound. A short-term decline in the latter is not a cause for concern, experts believe. For serious changes in the dynamics of the GBP, more weighty reasons are needed than the current political turmoil. In the long-term planning horizon, the pound shows a tendency to maintain stability.
