Pound Bullish on Boris?

GBP/USD and EUR/GBP are reactive to political uncertainty. Trade Forex volatility with City Index and take advantage of tight spreads and free SMS volatility alerts.

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Boris vs Hunt in race for No 10

After several weeks of votes and hustings, the final two candidates to become Prime Minister have been announced. Boris Johnson takes on Foreign Secretary Jeremy Hunt in the deciding vote by Conservative Party members, with the winner being announced on 22nd July.

Hunt campaigned for Remain but has since become a Brexit convert, vowing to take the UK out of the EU with a mutually-beneficial deal. Johnson, however, has spoken of leaving at any cost on the 31st October deadline, causing a greater risk of no-deal.

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What happens next?

With the final two candidates announced, the vote will now be put to around 125,000 Conservative Party members. Both candidates will now appear in local and national hustings to drum up support for their respective campaigns ahead of the crucial vote.

Most commentators have widely tipped Johnson to succeed May, having gained 160 votes from fellow Tory MPs in the last round of voting.

Potential market impacts

The Tory leadership race is set to provide even more opportunities for traders as uncertainty surrounding Britain’s next Prime Minister continues to drive market volatility. Some of the key markets likely to be affected by the contest are:

UK 100

Britain’s main equity index has responded positively to sterling weakness since the referendum, reaching an all-time high of 7792 in May 2018. Companies however remain cautious about the potential outcomes of Brexit, with many devising contingency plans in the case of no-deal.

Major GBP pairs

Key sterling pairs are also expected to see increased volatility as a result of the leadership contest, with EUR/GBP and GBP/USD in focus for many traders.

When Theresa May suggested in 2018 that no deal “wouldn’t be the end of the world”, sterling plummeted to the year’s low of 1.10 against the dollar. Similar comments from any of the candidates, and eventual PM, could see key pairs react in the same manner.

Brexit High/Low

The City Index High/Low indices are comprised of the 50 most and least likely equities to be affected by Brexit. These markets give traders the ability to take a position on a basket of shares and take advantage of Brexit volatility without having to trade the UK 100.

We expect both markets to be more heavily traded as the 31st October deadline approaches.

Precious metals

Safe-haven markets such as gold, palladium and platinum may also see increased volatility as traders look to take a risk-off position amid ongoing political uncertainty.

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