Official site of the most popular forex trading expert advisor...

GBP/USD. The Sword of Damocles hangs over Boris Johnson

British Prime Minister Boris Johnson may be given a vote of no confidence today. Voting will take place on Monday evening, approximately from 18 to 20 hours local time. In case of defeat, Johnson will have to resign as prime minister. And although the power in the UK will remain in the hands of the Conservative Party, a losing vote for Boris could shake the position of the British currency. Therefore, it is quite risky to trade the GBP/USD pair today - now none of the political experts can accurately predict the outcome of today's meeting of the Conservative Party faction.analytics629e01546b19f.jpg

The probability of Johnson's resignation from the post of prime minister is estimated at 30-40%. Actually, for this reason, GBP/USD traders are in no hurry to panic - the pair continues to trade within the range of 1.2460-1.2580, alternately starting from the boundaries of this price corridor. However, if the results of the vote are still not in favor of the prime minister, the pound may at least collapse to the base of the 24th figure. Boris Johnson is too odious a person for his departure from the political Olympus to be quiet and unnoticeable.

54 members of parliament from the Conservative Party appealed to declare no confidence in the head of the British government. According to the regulations, this is enough for the issue to be put to the vote of the entire faction. British government Secretary Sue Gray, who investigated quarantine violations by members of Johnson's Cabinet at the height of the coronavirus epidemic, has prepared a 50-page report on this topic. He described in detail the circumstances of 16 parties at the Prime Minister's residence in Downing Street in 2020 and 2021. As part of this investigation, many participants of the COVID party (more than 80 in total) have already been brought to administrative responsibility. They received fines for violating the lockdown. However, Johnson may be brought to political responsibility.

It is worth noting that Boris Johnson does not deny the fact that during the strict quarantine he participated in grandiose parties attended not only by some members of the government but also by MPs, and members of parliament. The prime minister has repeatedly apologized for his behavior during the pandemic, but at the same time stated that he would not resign voluntarily - according to him, "the government faces too many tasks, so it would be irresponsible to resign." Johnson's opponents had to wait for the completion of the official investigation to initiate a forced resignation. For this to happen, at least 180 of his fellow party members - the majority of the faction members (there are 359 of them in parliament) - must express their distrust of Johnson. In this case, the Conservative Party, which has a strong majority in the lower house of parliament, will have to nominate a new candidate for prime minister.

Judging by the behavior of the British currency, traders are confident that Johnson will win this fight. Some members of his government have already expressed support for their "boss". In particular, Johnson was supported by the Minister of Foreign Affairs, the Minister of Finance, and the government representative in the lower house of Parliament. However, most members of the faction did not voice their position, so a certain intrigue remains here.


Moreover, at the end of May, the British edition of the Daily Mail published information that Boris Johnson dropped to the last place in the rating of confidence in ministers who are part of the current government (Defense Minister Ben Wallace took the first place in the rating). According to opinion polls, a sharp decline in the level of support for Johnson could lead to a crushing defeat of the Conservative Party in the parliamentary elections. This factor also cannot be discounted (therefore, the probability of implementing a negative scenario for the prime minister is estimated quite high, at 30-40%).

But the pound is ignoring political risks at the moment. According to several experts, Johnson will strengthen his position by going through the millstones of this procedure. After all, if he wins a vote of confidence (which is the most likely scenario), it will put an end to months of speculation and allow his government to focus on other political and economic priorities. In addition, according to UK law, if Johnson is not dismissed now, he will receive conditional insurance for a year. Only in June 2023, it will be possible to repeat this procedure.

Thus, today's events may provoke increased volatility in the GBP/USD pair, especially if the conservatives vote for the resignation of the current prime minister. Despite numerous signs that Johnson will still pass this test, the opposite option cannot be ruled out.

If the Conservatives fail to declare a vote of no confidence in the prime minister, the pound is likely to show a short-term positive reaction. But if Johnson is defeated, the Briton will be under significant pressure, at least in the short term. Therefore, over the next day, it is most expedient to take a wait-and-see position on the GBP/USD pair, until political passions settle down in the country of the UK.

Trading analysis offered by RobotFX and Flex EA.